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Susan can buy a zero-coupon bond that will pay 1,000 at the end of 12 years and is currently selling for 624.60. Instead, she purchases a bond with 6% semi-annual coupons that will pay 1,000 at the end of 10 years. If she pays X for this bond she will earn the same annual effective interest rate as the zero-coupon bond.
Calculate X.
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- 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.Suppose that Jenna just bought a newly issued 15-year bond with a coupon rate equal to 7%. If Jenna sells the bond at the end of the year when the market price is $917, what would be the bond's yield to maturity? What return would she earn? What portion of the return represents capital gains and what portion represents the current yield?If Annie buys the bond today at its $1,000 par value and holds it for exactly 3 years, at which time the required return is 7.0%, how much of a gain or loss will she experience in the value of the bond (ignoring interest already received and assuming annual interest)? Rework part (f), assuming that Annie holds the bond for 10 years and sells it when the required return is 7.0%. Compare your finding to that in part (f), and comment on the bond's maturity risk. Assume that Annie buys the bond at its current price of $983.80 and holds it until maturity. What will her current yield and yield to maturity (YTM) be, assuming annual interest? After evaluating all of the issues raised above, what recommendation would you give Annie with regard to her proposed investment in the Atilier Industries bonds?
- Jerry has an opportunity to buy a bond with a face value of $10,000 and a coupon rate of 13 percent, payable semiannually. a. If the bond matures in five years and Jerry can currently buy one for $3,500, what is his IRR for this investment? b. If his MARR for this type of investment is 20 percent, should he buy the bond?Consider a six-year, 10% coupon bond (yearly coupon payments) with a face value of $1000 that John bought for $950. (a). What is the yield to maturity of this bond? (b). Suppose after holding it for one year, (and receiving one coupon payment), John sells it for $1050. What is the return John got from holding this bond for one year?Jerry has an opportunity to buy a bond with a face value of $10,000 and a coupon rate of 14 percent, payable semiannually. a. If the bond matures in five years and Jerry can currently buy one for $4000, what is his IRR for this investment?
- Linda wanted to invest in a bond issued by JoJo Ltd. The bond has $1,000 par value, matures in ten (8) years and has a coupon rate of 8.5%, with coupon paid semi-annually. What is the maximum price Linda should pay for the bond if her alternative is to invest in her friend's company who will guarantee a 10% pa return, compound semi-annually?Diane Carter is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond?Eren purchased a bond, costing 890, three years ago, with a current price of 925. This bond paid 100 year as interest payments ( end of each year). She wants to hold the bond for 4 more years and it is expected to be sold at the end of year four at 960. It is also expected that there will be no default of yearly interest payments. Assuming that the required rate of return is 11.25%. Compute the price of the bond?
- Carol plans to invest in a 12 year bond issued by Iris Ltd that pays a coupon of 4.8 percent. Coupon payments are made semi-annually. If the current market rate is 6.4 percent, what is the maximum amount Carol should be willing to pay for this bond? Assume it has a par value of $1000.Michelle Walker is interested in buying a five year-zero coupon bond with a face value of $1000. She understands that the market interest for similar investments is 10.0 percent. Assume annual coupon payments. What is the current value of this bond? (Round to 2 decimal places.)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