Suppose a bond has a face value of $3,000, 10 years to maturity, an annual coupon of 7%, and sells for $2,800. Calculate the yield to maturity (YTM). Calculate the price 4 years from now, assuming the yield to maturity remains constant.Suppose Roberto is considering a 12-year bond with a face value of $2,000 and a rate of 8% payable semiannually. Calculate the payment Roberto would have to make if an "effective" annual interest rate of 8.2% were required.River Industries paid $2.00 in dividends per share. The dividend is expected to increase 10% annually for the next 4 years and 6% in the remaining years. Calculate the expected dividend per share for each of the 6 years.

1) Face value = $3000 Selling price = $2800 Duration till maturity (n) = 10 years Coupon = 7% of…

Answered: Suppose a bond has a face value of…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 22P: Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of...

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Similar questions

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:
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?
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?

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