Isabel prefers to purchase bonds that contain a sinking fund provision to protect her from any potential loss of her invested capital. She purchased a 20-year, $20,000 sinking fund bond with a 12% coupon, paid semi-annually, for $18,900. If the company calls the bond after 10 years, and the call penalty requires a payment of $30 per $1,000 of face value, what are the nominal and effective yields to call on this bond? Oa) 12.77% and 13.18%, respectively Ob) 12.81% and 13.22%, respectively Oc) 13.01% and 13.43% respectivel

Isabel prefers to purchase bonds that contain a sinking fund provision to protect her from any potential loss of her invested capital. She purchased a 20-year, $20,000 sinking fund bond with a 12% coupon, paid semi-annually, for $18,900. If the company calls the bond after 10 years, and the call penalty requires a payment of $30 per $1,000 of face value, what are the nominal and effective yields to call on this bond? Oa) 12.77% and 13.18%, respectively Ob) 12.81% and 13.22%, respectively Oc) 13.01% and 13.43% respectivel

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 87TPC

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Isabel prefers to purchase bonds that contain a sinking fund provision to protect her from any potential loss of her invested capital. She purchased a 20-year, $20,000 sinking fund bond with a 12% coupon, paid seml-annually, for $18,900. If the company calls the bond after 10 years, and the call penaity requires a payment of $30 per $1,000 of face value, what are the yeilds to maturity and yeild to call on this bond? -previous answered questions were wrong, show calculations.
Isona has owned a $10,000, 10-year bond for 4 years and is considering selling it. If it has a bond rate of 4% annually, Isona paid $9,100 for it originally, and she wants an 9% annual yield, how much should she charge for the bond?
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.
Marcie has some extra money that she wants to place into a relatively safe investment. Her employer is offering to employees a generous 5% discount for 10-year $5,000 bonds that carry a coupon rate of 6% paid semiannually. The expectation is to match her return on other safe investments, which have averaged 6.7% per year compounded semiannually. (This is an effective rate of 6.81% per year.) Should she buy the bond?
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?
Kendra buys a 7 year, $100,000.00 face value, 4.250% coupon bond. The bond is priced to yield r(365) = 2.000%, and is secured by a sinking fund (set up by the issuer with quarterly deposits), that earns 5.750% compounded weekly. On default, Kendra claims the balance in the sinking fund. How much does she lose if the issuer defaults after 6 years (just after making their coupon payment, and sinking fund deposit).
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.
Zilu owns a bond that will pay her $25 in interest each year plus a $1,000 principal payment at maturity. The $1,000 principal payment is called the Multiple Choice F.coupon. A. par value. b. discount. C.yield. D.call premium. E.None of the options are correct.
Fatima buys an 11-year, $314,530, a zero-coupon bond with an annual YTM of 1.74%. If she sells the bond after 6 years for __________, she will have a __________ profit. A. $311,375.52 / negative B. $300,000.04 / negative C. $288,538.26 / positive D. $277,323.96 / positive
On January 1, 2021, Austin plans to pay $1,050 for a $1,000, 12% semiannual bond. He will keep the bond for three years, receive six coupon payments, and then sell it. How much should he sell the bond for in order to receive a yield of 10% compounded semiannually?
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?
Billy has a bond paying semiannual coupons that has an annual coupon rate of 10%, a term of 15 years, and both face and redemption values of 20,000. Coupons are paid at the end of each 6 month period, starting 6 months after issue. Billy sells the bond to Mandy 34 months and 15 days after issue at an annual yield of 8% convertible semiannually. What price does Mandy pay Billy?