In 2016 Beth purchased a 10-year, 3.20% p.a. semi-annual paying coupon bond with a Face Value (FV) of $2 000 000, as she was attracted by the fixed income stream in order to fund her retirement expenses. a) What is the price of this bond in 2020 (6 years remaining) at a current market interest rate of 0.30% p.a.? Show formula, variables, calculation and a concluding statement in your response.

In 2016 Beth purchased a 10-year, 3.20% p.a. semi-annual paying coupon bond with a Face Value (FV) of $2 000 000, as she was attracted by the fixed income stream in order to fund her retirement expenses. a) What is the price of this bond in 2020 (6 years remaining) at a current market interest rate of 0.30% p.a.? Show formula, variables, calculation and a concluding statement in your response.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

In 2014 Ray purchased a 10-year, 3.80% p.a. semi-annual paying coupon bond with a Face Value (FV) of $1 000 000, as she was attracted by the fixed income stream in order to fund her retirement expenses. a) What is the price of this bond in 2019 (5 years remaining) at a current market interest rate of 1.60% p.a.? Show formula, variables, calculation and a concluding statement in your response. b) Describe the relationship between bond prices and interest rates. c) Ray decided to sell the bond from part a) and will invest the proceeds by buying blue chip shares. Explain whether this is wise by Ray by discussing the advantages and disadvantages of shares.
In 2016 Beth purchased a 10-year, 3.20% p.a. semi-annual paying coupon bond with a Face Value (FV) of $2 000 000, as she was attracted by the fixed income stream in order to fund her retirement expenses. b) Is Beth's coupon bond currently selling at a premium, par or discount? Describe the relationship between bond prices and interest rates.
In 2016 Beth purchased a 10-year, 3.20% p.a. semi-annual paying coupon bond with a Face Value (FV) of $2 000 000, as she was attracted by the fixed income stream in order to fund her retirement expenses. c) Beth decided to sell the bond from part a) and is considering her investment options. A friend suggested that she invests the proceeds by buying a short-term debt instrument. Explain two advantages of short-term debt instruments.
In 2016 Beth purchased a 10-year, 3.20% p.a. semi-annual paying coupon bond with a Face Value (FV) of $2 000 000, as she was attracted by the fixed income stream in order to fund her retirement expenses. d) Elon, a Wall street portfolio manager, informed Beth that she should consider investing in his portfolio instead. He said his portfolio is perfect for someone who is looking to retire within the next 6 MONTHS. His portfolio has the following allocation of assets: Asset Class Allocation Shares in Small Companies (High Risk) 0% Shares in Blue Chip Companies (Low Risk) 20% Bonds 50% Cash 30% Does Elon have a point? Why or why not?
Last year Janet purchased a $1,000 face value corporate bond with an 8%annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expectedyield to maturity of 10.45%. If Janet sold the bond today for $820.17, what rate of returnwould she have earned for the past year?
Last year Janet purchased a $1,000 face value corporate bond with a 10% annual coupon rate and a 10-year maturity. At the time of the purchase, it had an expected yield to maturity of 11.18%. If Janet sold the bond today for $1,096.96, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.
Last year Janet purchased a $1,000 face value corporate bond with a 10% annual coupon rate and a 20-year maturity. At the time of the purchase, it had an expected yield to maturity of 10.16%. If Janet sold the bond today for $1,045.92, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. Please show calculations using calculator.
On July 1, 2015, Janet purchased a corporate bond with a face value of $40, 000 and coupon rate of 3.5% compounded semi - annually. Training The bond matures in 20 years. On July 1, 2020, Janet decides to sell the corporate bond. How much is the bond worth if interest rate for similar bonds is J 2 = 2.8%.
Last year, Joan purchased a $1,000 face value corporate bond with an 8% annual coupon rate and a 20-year maturity. At the time of the purchase, it had an expected yield to maturity of 9.63%. If Joan sold the bond today for $942.31, what rate of return would she have earned for the past year? Round your answer to two decimal places.
Mukesh purchased a $2,000 face value bond on January 2, 2022 for $2,000. The bond was issued on the same date and the maturity date of Bond is 5 years. Interest is payable at 6% compounded semi-annually on uncashed coupons on each of June 30 and December 31 at the investor’s option. REQUIRED: Assume Mukesh does not exercise his option to receive any cash interest before maturity, What amount of income will Mukesh have to include in 2022 and 2023.
Last year, Sally purchased a $1,000 face value corporate bond with an 11.2 percent annual coupon rate and a 12-year maturity. At the time of the purchase, it had an expected yield to maturity of 11.9 percent. If Sally sold the bond today for $949.88, what rate of return would she have earned for the past year? a. 11.02% b. 11.20% c. 11.10% d. –0.69% e. 10.51%
Four years earlier, Janice purchased a $1,000 face value corporate bond with a 6% annual coupon and maturing in 10 years. At the time of the purchase, it had an expected yield to maturity of 8.76%. If Janice sold the bond today for $1,088.39, what rate of return would she have earned for the last four years?