FOCUS ON PERSONAL FINANCE LL/ACCESS >BI
FOCUS ON PERSONAL FINANCE LL/ACCESS >BI
6th Edition
ISBN: 9781260529326
Author: Kapoor
Publisher: McGraw-Hill Publishing Co.
Question
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Chapter 11, Problem 10P

a)

Summary Introduction

To determine: Approximate market value.

b)

Summary Introduction

To discuss: The reason for increase in value of the bond.

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In 2001, you purchased a $1,000 corporate bond with a coupon interest rate of 5%. Today, comparable bonds are paying 4.30 percent. What is the approximate dollar price for which you could sell your bond? In your own words, describe why your bond increased in value.
One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 102.5 percent of par. Today, you sold this bond for 104 percent of par. What is your total dollar return on this investment? Can the calculator and excel solution be provided?
If you purchased a ten-year corporate bond, $1,000 par value, with a 5 percent coupon, and suddenly the rate on comparable bonds are at 7 percent, what is the price of the bond today?
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