Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184890
Author: PINDYCK
Publisher: PEARSON
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Chapter 15, Problem 4E
To determine
Effective yield of the bond.
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A bond with a face value of $1,000 has 8 years until maturity, has a coupon rate of 8%, and sells for $1,100.
What is the yield to maturity if interest is paid once a year?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.
What is the yield to maturity if interest is paid semiannually?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.
The price of a bond with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the bond then falls by $200, what will be the interest rate yield to a new buyer of the bond?
Multiple Choice
10 percent
15 percent
9.4 percent
12.5 percent
18.8 percent
A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%.
Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.
What is the yield to maturity if the bond is selling for $900?
What is the yield to maturity if the bond is selling for $1,000?
What is the yield to maturity if the bond is selling for $1,100?
Chapter 15 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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Similar questions
- (Fixed Income Securities) Calculate the duration and convexity of a two-year bond with a face value of £100 that pays coupons semi-annually at a rate of 9%. The required yield is 7%. (Please step by step solutions )arrow_forwardThe interest rate for a bond is always equal to its yield to maturity True Falsearrow_forwardIf the current price of a bond is greater than its face value: A) There is no right answer. B) the yield to maturity must be larger than the current yield. C) the coupon rate must be equal to the current yield.arrow_forward
- Calculate the present value of a $1,300 discount bondwith seven years to maturity if the yield to maturity is 8%.arrow_forwardThe yield-to-maturity of a discount bond is always negative. True Falsearrow_forwardWhich of the following $1,000 face-value securities has the highest yield to maturity? A) a 5 percent coupon bond with a price of $600 B) a 5 percent coupon bond with a price of $800 C) a 5.25 percent coupon bond with a price of $1,200 D) a 5 percent coupon bond with a price of $120arrow_forward
- Making the assumption of no compounding interest , suppose you purchase a perpetuity bond from CosoNostra Pizza Inc. for $ 4,000 with an annual coupon rate of 3 % . Specify all answers to the nearest dollar , and assume a discount rate equal to that of the current interest rate . Changes in the economy push interest rates up from 3 % to 5 % . For how much can you sell your bond following this change in market interest rates ?arrow_forwardConsider a bond which has a face value of $2,000, a coupon of $50, and is known to have a yield to maturity of 8%. Suppose that the bond matures in five years. What is the present value of the bond? $199.63 $1,526.77 $1,560.80 $373.85arrow_forwardWhich of the following is TRUE for a coupon bond? Select one: a. The yield to maturity is greater than the coupon rate when the bond price is above the par value. b. The price of a coupon bond and the yield to maturity are positively related. c. When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate d. The yield is less than the coupon rate when the bond price is below the par valuearrow_forward
- You are purchasing a 20-year, zero-coupon bond. The yield to maturity is 9.76 percent and the face value is $1,000. What is the current market price? Assume a semiannual interest rate payment.arrow_forwardBelow you will find the Demand and Supply Curves for $250,000 bonds that mature in 18 years: Qd = 400,000 – 2(P) Qs = 3(P) – 100,000 What is the current equilibrium interest rate in that bond market?arrow_forwardConsider a $1200 bond that makes $30 annual coupon payments. If the interest rate is 2 percent and the bond matures in two years, what is the bond's present value? Carefully follow all mathematical instructions. Round intermediate steps to four decimal places and your final answer to two decimal places.arrow_forward
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