Compute the intrinsic value of a 4 year maturity 15 % coupon bond , whose face value will be repaid in equal instalments after one year , in which there will be no principal payment. The market interest rate is forecasted as 13% for the first 2 years, and 15% for the 2nd. and the 3rd. Years.

Compute the intrinsic value of a 4 year maturity 15 % coupon bond , whose face value will be repaid in equal instalments after one year , in which there will be no principal payment. The market interest rate is forecasted as 13% for the first 2 years, and 15% for the 2nd. and the 3rd. Years.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

See similar textbooks

Related questions

Q: (Bond valuation) Calculate the value of a bond that matures in 15 years and has a $1,000 par…

A: The value of a bond is determined by calculating the present value of the coupon of the remaining…

Q: Compute the intrinsic value of an 18% coupon, a 4-year maturity bond whose principal will be repaid…

A: Intrinsic value is the present value

Q: a) A 15-year $1000 bond with semi-annual coupons paid at a nominal rate of 6% compounded…

A: Given, Callable amount = $1,100Face value = $1,000

Q: Find the value of a bond maturing in 10 years, with a $1,000 par value and a coupon interest…

A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…

Q: Calculate the Macaulay duration and the modified duration of a three-year bond with a face value of…

A: Answer - Macaulay Duration - Macaulay duration is a weighted average of the times to receive the…

Q: Compute the intrinsic value of an 18% coupon, a 4-year maturity bond whose principal will be repaid…

A: Intrinsic value is calculated by present value of cash flows. Present value of cash flows = Cash…

Q: The 3-year, 5-year, and 7-year zero rates are 1%, 2%, and 3%. The rates are given per annum with…

Q: Compute the current price of a bond which matures in 40 years and has a required rate of return of…

A: Bond is a debt instrument issued by companies and government. It is a fixed income instrument which…

Q: Compute the yield to maturity of a 19% coupon purchased for a 970t three-year bond whose principal…

A: Yield to maturity is the internal rate of return offered by the cash flows of bond. Cash flow of…

Q: Find the value of a bond maturing in 7years, with a $1,000 par value and a coupon interest rate of…

A: given data is - Face value = 1000 Coupon rate = 6.5% paid semi annually Coupon payment = 65 Yield =…

Q: Calculate the present value of a $1,000 discount bond with five years to maturity if the yield to…

A: Bond is a kind of financial instrument issued by a corporation or government that provides fixed…

Q: Calculate the value of a ¢5,000-par-value bond paying quarterly interest at an annual coupon…

A: Par Value = 5000 Time Period (N) = 10 years or 40 Quarters Quarterly Interest Rate Required Return…

Q: A four-year maturity deep discount coupon corporate bond with a required rate of return (YTM) of 12…

A: A zero-coupon bond is an interest-free loan pledge whose transactions instead of interest at a low…

Q: Assume that you purchase a five-year, $1,000 par value bond, with a 6 percent coupon and a yield of…

A: Calculating the current price of the bond. We have,Current price of bond = C [1 – (1 / (1+r)n ] / r…

Q: (Bond valuation) Enterprise, Inc. bonds have an annual coupon rate of 15 percent. The interest is…

A: Bond price is the sum of discounted cash flows arising from the bond. This includes the coupon…

Q: The market price of TRUST bond is currently $890. Its par value is equal to $1,000 and it is…

A: Bond: These are fixed-income securities that reflect loans from investors to borrowers . A bond can…

Q: A 15 years bond with annual coupon rate equal to 10% (paid semiannually), if the par value of the…

A: A bond is considered as a fixed-income instrument. A bond represents the loan provided by the…

Q: Find the selling price for a zero coupon bond with 8 years to maturity and a $100,000 maturity value…

A: A zero-Coupon Bond is a debt security that is traded at a deep discount instead of paying interest.

Q: Calculate the convexity of a $1,000 par value bond, with a coupon rate of 9% that matures in 4 years…

A: given, r=10% n=4 coupon rate =9% par =1000

Q: Calculate the price of a zero coupon bond that matures in 20 years if the market interest rate is…

A: Formulas: Current price = Face value / (1+rate)^years

Q: Compute the current price of a bond which matures in 40 years and has a required rate of return of…

A: The current price of the bond is equivalent to the sum of the present value of coupon payment and…

Q: Suppose a bond with face and redemption value of $33895 matures in 34 years and has a nominal annual…

A: Face Value $33,895.00 Coupon Rate 5% Yield 3% Time Period of Bond 34 Years Time Period of…

Q: Consider a 30-year 8 percent bond, paying coupon semi-annually, and selling for $896.81 today (note…

A: Time duration = 30 years Compounding semi-annually Selling price = $896.81 Yield = 9% Interest…

Q: What is the Macaulay duration of a semi-annual bond with a coupon rate of 7 percent, five years to…

A: First, need to find out Yeild to Maturity Solved using Financial Calculator PV = -959 FV = 1000…

Q: Compute the intrinsic value of an 18% coupon ; a 4-year maturity bond whose principal will be repaid…

A: Intrinsic value is present value

Q: A 25-year Treasury bond has a face value of $1,000, price of $1,400 with a $40 coupon payment.…

A: Face Value = 1000 Price = 1400 Coupon = 40 Price after one year = 1300

Q: ond which will mature in 10 years and with a bond rate of 15% payable annually is to be redeemed at…

A: Explanation of concept Yield to Maturity: The yield to maturity (YTM) of a bond is the overall rate…

Q: A bond with a coupon rate of 6.5% (assume it is paid once annually), maturing in 10 years at a value…

A: The current yield is providing the current profitability of the bond value. The value of the bond is…

Q: Assume the current Treasury yield curve shows that the spot rates six months, one year, and one and…

A: The following formula will be used which calculating the price of bond:

Q: What should the current market price be for a bond with a $1,000 face value, a 10% coupon rate paid…

A: I/Y = rate = 12% NPER = Number of years = 20 PMT = Coupon = -1000*10% = -100 FV = Future value or…

Q: A bond with a face value of $5,000 pays interest of 8% per year. This bond will be redeemed at par…

A: Information Provided: Face value = $5000 Coupon rate = 8% Term = 20 years Yield = 10%

Q: Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have a…

A: a. Current yield: Current yield = Coupon / Current price Current yield = ($1000*7%) / $960 Current…

Q: Compute the intrinsic value of a 15% coupon, 4-year maturity bond whose principal will be repaid in…

A: A bond is a debt instrument that is issued by the organization to raise the funds from the investor…

Q: Consider an 8% coupon bond selling for $953.10 with three years until maturity making annualcoupon…

A: Yield to maturity refers to the return that is expected to be earned on the bond investment if the…

Q: For the following questions, assume the normal case that coupon payments are semi-annual. a. What is…

A: N = 12 years Coupon Rate = 6.2% Price = 1000 Face Value = 1000

Q: Consider a 10-year bond, with face value 1000, coupon rate 6% (annual coupon payment), selling at…

A: Given information: 10 year bond Face value : $1,000 Coupon rate : 6% Reinvestment rate : 5%

Q: Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6…

A: Given details are : Par value of bond = $1000 Maturity life = 10 years Interest rate = 6% Coupon = 0…

Q: Assume that a company issued a semi-annual bond with $1000 face value, 10% coupon rate and 15 years…

A: Working note:

Q: Calculate the fair present value of the bond which makes coupon payments semiannually and has a…

A: Answer Nominal value of bond = $1 000 Coupon rate = 10% Required rate =10% Coupon amount Semiannual…

Q: Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have a…

A: Note : As per our guidelines, we can only answer 1 question at once. Since, you haven't mentioned…

Q: 2. Compute the intrinsic value of a 16 % coupon, 3 year maturity bond whose face value (1000Ł) will…

A: Bond is a debt instrument issued by companies and government. It is a fixed income instrument which…

Q: Compute the intrinsic value of an 18% coupon, a 4-year maturity bond whose principal will be repaid…

A: Intrinsic Value of Coupon = Present Value of Coupons + Present Value of principal repayment

Q: Compute the current price of a bond which matures in 40 years and has a required rate of return of…

A: Information Provided: Term = 40 years Required rate = 10% Coupon rate semi-annually = 6% Fututre…

Q: A bond with 15 years to maturity, a face value of $1000, pays a coupon rate of 14% APR compounded…

A: Solution:- Yield-to-maturity means the rate of return earned by bond holder, if the bond is hold…

Q: Assume that the issue will have a coupon rate of 5% with a 15 year maturity. Assume this are…

A: Given information: Face value : $1,000 Coupon rate : 5% Time to maturity : 15 Market rate : 4.5%

Q: Assume the current Treasury yield curve shows that the spot rates for six months, one year, and…

A: The price of the bond would be considered after some maturity period written under the agreement.…

Q: a) A 15-year $1000 bond with semi-annual coupons paid at a nominal rate of 6% compounded…

A: Given, Callable amount = $1,100Face value = $1,000

Question

Compute the intrinsic value of a 4 year maturity 15 % coupon bond , whose face value will
be repaid in equal instalments after one year , in which there will be no principal payment.
The market interest rate is forecasted as 13% for the first 2 years, and 15% for the 2nd. and
the 3rd. Years.

Leveraging special tenchniques in analyzing historical data to predict future trends. Forecasting covers the methods and types of forecasting and their application to case studies.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Current Yield for Annual Payments Heath Food Corporations bonds have 7 years remaining to maturity. The bonds have a face value of 1,000 and a yield to maturity of 8%. They pay interest annually and have a 9% coupon rate. What is their current yield?
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?
Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?
Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table: