Answered: What is the duration of a two-year bond…

What is the duration of a two-year bond that pays an annual coupon of 9 percent and has a current yield to maturity of 16 percent? Use $1,000 as the face value.

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 13P: Yield to Maturity and Current Yield You just purchased a bond that matures in 5 years. The bond has...

See similar textbooks

Related questions

Q: What is the current value of a 12-year bond with a coupon rate of 8% and with quarterly payments if…

A: Following details are given in the question : Coupon rate = 8% Time period = 12 years Coupon…

Q: suppose a bond has a $1,000 par value, 10 year to maturity a 7% annual coupon, and sells for $985…

A: A financial instrument that doesn’t affect the ownership of the common shareholders or management of…

Q: What is the yield to maturity on a 10-year, 9 percent annual coupon, $1,000 par value bond that…

A: Yield to maturity(YTM) is the rate of return on bond that is obtained if bond is held till maturity.…

Q: A bond with annual coupon payments has a coupon rate of 8%, yield to maturity of 10%, and Macaulay…

A: Modified duration of bond can be calculated by using this equation Modified duration =Macaulay…

Q: What is the semi-annual coupan bond's norminal yield to maturity (YTM), if the years to maturity is…

A: Bond is debt-instrument that is used by entities t raise debt funds from public-at-large. Bonds pay…

Q: Assume that a company issued a bond with $1000 face value, 10% coupon rate, 20 years maturity. If…

A: Face value =$1000 Coupon rate =10% Coupon payment =$100 Time =20 years YTM =8% So, present value of…

Q: A bond with 20 years to maturity and a face value of $1000 pays semi-annual coupons at a rate of 9%…

A: Given Information:Par value of bond = $1000 Annual coupon rate of bond = 9% (paid semi annually)…

Q: The yield to maturity of a $1,000 bond with a 6.8% coupon rate, semiannual coupons, and two years to…

A: Bond valuation is an important technique of fundamental analysis of security management. The bond…

Q: A 30-year bond with par value $1,000 has annual coupons and sells for 1,300. The write-down in the…

A: Bonds are a part of debt instruments having fixed time to maturity. Bonds carry two types of…

Q: current price of

A: Bond price refers to the present discounted value based on some future date of cash generated by…

Q: What is the Yield-to-Maturity on a 20-year bond with a 3% coupon (paid at 1.5% every six months)…

A: Using excel rate function

Q: A 12-year bond has a 9 percent annual coupon, a yield to maturity of 8 percent, and a face value of…

A: Bond value is the present value of all the cash flow the bond will generate in its lifetime, it…

Q: What is the semi annual coupon bonds nominal yield to maturity (ytm),if the years to maturity is 15…

A: in this problem we have to consider discount rate at which present value of par value and present…

Q: find the present value of a 2 year bond that pays a semi annual coupon has a coupon rate of 6…

A: Bond is a long-term debt instrument that is used by organizations to raise debt funds from public.…

Q: A $1,000 face value bond has a 3% annual coupon rate and 12 years to maturity. If the yield to…

A: A financial instrument that doesn’t affect the ownership of the common shareholders or management of…

Q: A 25-year coupon bond pays an annual coupon of 5 and has a face value of 100. If the current price…

A: Annual Interest = 5% FV = Face Value of the Bond = 100 Price = Current Market Price = 100 Maturity =…

Q: A 10-year, 12 percent semiannual coupon bond, with a par value of $1,000 sells for $1,100. What is…

A: Given details are : Par value of bond = $1000 Current price i.e. present value = $1100 Time period =…

Q: What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for…

A: In the given above question we need to compute the yield to maturity on a bond. We can solve this…

Q: A bond with 20 years to maturity and a face value of $1000 pays semi-annual coupons at a rate of 9%…

A: Solution:- Bond price means the price at which the bond is currently trading in the market. Price of…

Q: A zero-coupon bond that matures in 15 years is currently selling for $209 per $1,000 par value. What…

A: In the given question we require to compute the yield on zero coupon bond using below details : Time…

Q: A three-year bond is issued with a 9% coupon paid annually, and a maturity value of £100. If the…

A: Par value = £100 Coupon rate = 9% Coupon rate = 100*0.09= £9 Yield to maturity = 12% Years to…

Q: What is the duration of a 2-year bond that pays a coupon of 4% per annum? It has a face value of…

A: Duration is the period required for the bond holder to collect amount invested in the bond.

Q: What is the market value of a bond that will pay a total of 60 semi-annual coupons of $50 each over…

A: The market price of bond is calculated as the present value of coupon and face value

Q: You purchase a bond for $825. It pays a semi-annual coupon of 4 percent, and the bond matures after…

A: Yield-to-Maturity refers to return rate that a bond will effectively generate each year if bond is…

Q: What is the current price and Macaulay's duration of a $1,000, 8% coupon bond that pays interest…

A: Calculation of current price and Macaulay’s duration:The bond price is $895.64, and Macaulay’s…

Q: What is the YTM of a bond with 12 years to maturity, coupon rate of 10% paid annually, par value of…

A: Yield to maturity (YTM) is the discount rate or the rate of return that an investor earns by holding…

Q: A bond that matures in 8 years has a par value of $1,000 and an annual coupon payment of $70, its…

A: Bonds are instrument issued by company acknowledging the debt raised by company . It is a liability…

Q: A bond with 20 years to maturity and a face value of $1000 pays semi-annual coupons at a rate of 9%…

A: Solution:- Bond price means the price at which the bond is currently trading in the market. Price of…

Q: A bond matures in 15 years and pays an 8 percent annual coupon. The bond has a face value of $1,000…

A: Current yield = coupon price /current market price Yield on bond is rate we earn if we held the bond…

Q: What is the yield to maturity, to the nearest percent, for the following bond: current price is…

A: Bonds are the financial instruments that are issued financial institution to raise funds from…

Q: What is the yield to maturity for the following bond: current price is $908, coupon rate is 11…

A: Here, Present value (PV) = $908 Maturity value (FV) = $1,000 Coupon rate = 11% Time to maturity (n)…

Q: What is the duration of a five-year bond with a coupon rate of 7%, a yield to maturity of 8%, a…

A: Given: Years = 5 Coupon rate = 7% Yield to maturity = 8% Face value = $1,000

Q: Assume a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of…

A: Bond value is the current worth of a bond on the basis of the present value of the bond expected…

Q: Carrie’s Clothes, Inc. has a five-year bond outstanding that pays $60 annually. The face value of…

A: a) Bond's Coupon Rate = Annual Coupon / Face Value

Q: Calculate the value of a bond that matures in 15 years and has $1,000 par value the annual interest…

A: Bonds are considered a long-term financial liability. This is one of the methods of raising funds…

Q: A bond has a $1,000 par value, 10 years to maturity, and a 7% annual coupon and sells for $985.…

A: Yield to maturity (YTM) is the total return expected on the bond if the bold is held till maturity.…

Q: Consider a 30-year 8 percent bond, paying coupon semi-annually, and selling for $960. If the bond is…

A: HOLDING PERIOD YEILD FORMULA: holding period yield=incom generated+selling price-purchase…

Q: What is the price of a 5-year bond with a nominal value of $100, a yield to maturity of 7% (with…

A: Nominal value (V) = $100 Yield to maturity (i) = 0.07 Coupon rate = 0.10 Annual coupon amount (C) =…

Q: A 10 year bond with 5% annual coupon and $1,000 par value sells for $1,200. What is the…

A: Face value = $1000 Duration (n) = 10 years Coupon = 5% of $1000 = $50 Bond price = $1200 Let r =…

Q: Find the yield to maturity on a semi-annual coupon bond with a face value of P 1,000, a coupon rate…

A: Solution:- Yield to maturity is the rate of return earned by the bond holder, if he holds the bond…

Q: A 3-year bond with 10% coupon rate and Rs.1000 face value has the yield to maturity of 12%. Assuming…

A: A financial instrument that doesn’t affect the ownership of the common shareholders or management of…

Q: What is the value of a 6%, five year bond with annual coupons and face value equal to $1,000, if the…

A: The Current price of the Bond is the present value of its expected future cash flow which is…

Q: A bond maturing in fifteen years has a a current price of $825.65, yield to maturity of 9.25%, a…

A: The coupon rate is the annual return an investor seek to receive while holding a bond. Coupon rate…

Q: What is the approximate yield to maturity (YTM) of a bond that is currently selling for $1,150 in…

A: Par value (F)= $ 1000 Coupon rate = 14% Coupon amount (C) = 1000*0.14 = $ 140 Years to maturity (N)…

Q: Calculate the value of a bond that matures in 15 years and has a $1,000 par value. The annual…

A: Face Value ( Par Value) = 1000 Time Period = 15 years Coupon = Coupon Rate * Face Value = 11%*1000 =…

Question

What is the duration of a two-year bond that
pays an annual coupon of 9 percent and has a
current yield to maturity of 16 percent? Use
$1,000 as the face value.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
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?
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 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:
Current Yield for Annual Payments Heath Food Corporations bonds have 7 years remaining to maturity. The bonds have a face value of 1,000 and a yield to maturity of 8%. They pay interest annually and have a 9% coupon rate. What is their current yield?
Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield?
Yield to Maturity and Current Yield You just purchased a bond that matures in 5 years. The bond has a face value of 1,000 and an 8% annual coupon. The bond has a current yield of 8.21%. What is the bonds yield to maturity?