The government issued a 15 year bond offering an interest rate of 12 per cent 10 years ago. Since then interest rates have fallen sharply. The bond now has five years to run to maturity and the government has just issued a five year bond offering an interest rate of 6 per cent. Determine a value for the bond that has five years to run to maturity, assume the bond has a face value of £100 and interest is paid annually. Explain your answer.
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The government issued a 15 year bond offering an interest rate of 12 per cent 10 years ago. Since then interest rates have fallen sharply. The bond now has five years to run to maturity and the government has just issued a five year bond offering an interest rate of 6 per cent. Determine a
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- A government bond with a face value of $1,000 was issued eight years ago and there are seven years remaining until maturity. The bond pays semi-annual coupon payments of $45, the coupon rate is 9% pa paid twice yearly and rates in the marketplace are 8% pa compounded semi-annually. What is the value of the bond today? a. $1,052.82 b. $1,033.66 c. $1,000.00 d. $817.78 e. $1,058.26Corral Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 8.5 percent, payable annually. The one-year interest rate is 8.5 percent. Next year, there is a 40 percent probability that interest rates will increase to 10 percent, and there is a 60 percent probability that they will fall to 6 percent. If the company decides instead to make the bonds callable in one year, what coupon will be demanded by the bondholders for the bonds to sell at par? Assume that the bonds will be called if interest rates fall and that the call premium is equal to the annual coupon. a) 8.12% b) 8.77% c) 8.59% d) 8.35%The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d.
- A government bond with a face value of $1,000 was issued eight years ago and there are twelve years remaining until maturity. The bond pays annual coupon payments of $90, the coupon rate is 9% pa and rates in the marketplace are 8% p.a. What is the value of the bond today? a. $1,000.00 b. $1,075.36 c. $1,762.35 d. $1,057.47 e. $1,105.29The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d. The first three subparts have been answered. Please answer #4 and #5. Should be pretty simple, but I just want to make sure I understand the material.The government has issued a bond that will pay 2.000 in 10 years. The bond will pay no interim coupon payments.What is the present value of the bond if the discount rate is 12 percent?
- The government has issued a bond that will pay 2.000 in 10 years. The bond will pay no interim coupon payments. What is the present value of the bond if the discount rate is 12 percent?The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d. My teacher gave me this solution: SOLUTION: PB = PMT [PVFAk,n] + FV [PVFk,n] n = 20 ´ 2 = 40 k = 12/2 = 6 PMT = $1,000 ´ .10/2 = $50 FV = $1,000 PB = $50 [PVFA6,40] + $1,000 [PVF6,40] = $50 (15.046 3) + $1,000 (.0972) = $849.52 Bartleby gave me this answer earlier tonight: particulars periods cash flows ($) PVF @ 6% Present Value ($) coupon payments ($1,000 X 5%) 1 to 50 50.00 15.469974 773.4987164 payment on redemption 50 1000 0.053283 53.283021178 Present…Suppose a State of New York bond will pay $1,000 ten years from now. If the going interest rate on these 10-year bonds is 5.0%, how much is the bond worth today?
- Suppose Ford Motor Company issues a five year bond with a face value of $5,000 that pays an annual coupon payment of $150. a. What is the interest rate Ford is paying on the borrowed funds? b. Suppose the market interest rate rises from 3% to 4% a year after Ford issues the bonds. Will the value of the bond increase or decrease?Suppose a U.S. government bond will pay $1,000 three years from now. If the going interest rate on 3‐year government bonds is 4%, how much is the bond worth today?Five years ago, the city of Baltimore sold at par a $1,000 bond with a coupon rate of 8 percent and 20 years to maturity. If this bond pays interest semiannually, what is the value of this bond to an investor who requires an 8 percent rate of return?