Personal Finance, Student Value Edition Plus MyLab Finance with Pearson eText -- Access Card Package (6th Edition)
6th Edition
ISBN: 9780134426839
Author: Jeff Madura
Publisher: PEARSON
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Chapter 16, Problem 8FPP
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ulie is contemplating buying a
10-year,
$1,000
bond with a
7%
coupon rate (coupons paid semiannually). The bond is trading at a price that implies a
$906.92
bond value (i.e., per
$1,000
of face).
a. What is the bond's yield to maturity (YTM)?
b. If the bond's YTM changes to
8%,
what will the bond's value be (per $1,000 of face)?
Question content area bottom
Part 1
a. The YTM is
enter your response here%.
(Round to two decimal places.)
b. The value per $1,000 of face at the new YTM is
$enter your response here.
(Round to the nearest cent.)
Carrie wants to invest in five-year bonds that are currently priced at $872.48. These bonds have a coupon rate of 6% and make semiannual coupon payments. What is the current market yield of this bond?
Barbara Jones wants to invest in four-year bonds that are currently priced at $870.65. These bonds have a coupon rate of 5.2 percent and make semiannual coupon payments. What is the current market yield on this bond?
- Current Markey Yeild:
Chapter 16 Solutions
Personal Finance, Student Value Edition Plus MyLab Finance with Pearson eText -- Access Card Package (6th Edition)
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Corporate Bonds. What are corporate bonds? Are...Ch. 16 - Prob. 10RQ
Ch. 16 - Prob. 11RQCh. 16 - Prob. 12RQCh. 16 - Prob. 13RQCh. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - Prob. 16RQCh. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Maturity Matching. Describe the maturity matching...Ch. 16 - Bond value. How is the value of a bond determined?...Ch. 16 - Prob. 21RQCh. 16 - Prob. 22RQCh. 16 - Prob. 23RQCh. 16 - Prob. 24RQCh. 16 - Prob. 25RQCh. 16 - Bond Values. Describe the process of valuing a...Ch. 16 - Prob. 27RQCh. 16 - Prob. 28RQCh. 16 - Bond Payments. Bernie purchased 20 bonds with par...Ch. 16 - Prob. 2FPPCh. 16 - Prob. 3FPPCh. 16 - Tax Consequences. Katie paid 9,400 for a Ginnie...Ch. 16 - Return on Bonds. Timothy has an opportunity to buy...Ch. 16 - Bond Valuation. Mia wants to invest in Treasury...Ch. 16 - Bond Valuation. Emma is considering purchasing...Ch. 16 - Bond Valuation. Mark has a Treasury bond with a...Ch. 16 - Prob. 9FPPCh. 16 - Risk Premium. Sandy has a choice between...Ch. 16 - Prob. 1FPOECh. 16 - Prob. 1PPF
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- Landon is considering the purchase of a $2500 bond from Braydon. There are 5 years remaining until the bond matures. Coupon payments are made on a semiannual basis. Landon decides to offer Braydon $2000 for the bond because he wants to earn precisely 30% yield per year compounded semiannually on the investment. What is the effective annual bond interest rate for this particular bond? Bond Equation: P= Vr(P|A, i%, n).arrow_forwardGreg is considering another bond, Bond D. It has an 8% semiannual coupon and a $1,000 face value. Bond D is scheduled to mature in 9 years and has a price of $1,150. It is also callable in 5 years at a call price of $1,040. What is the bond’s YTM? What is the bond’s YTC? If Mr. Greg were to purchase this bond, would he be more likely to receive the YTM or YTC? Explain your answer.arrow_forwardLaura Hall is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 10.1 percent. Assume annual coupon payments. What is the current value of this bond? (Round answer to 2 decimal places, e.g. 15.25.) Current value of bond $arrow_forward
- Diane Carter is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond?arrow_forwardNancy Jackson is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9.1 percent. Assume annual coupon payments. What is the current value of this bond? (Round answer to 2 decimal places, e.g. 15.25.) Current value of bond $arrow_forwardSuppose that in 2018 your grandmother gifted you a 30 year US Treasury bond which she had bought newly issued in 2010. This bond has a face value of $10,000 and pays 4% coupon every December. This bond will mature in 2040 December. You held that bond and earned coupon payments for two years but in January 2020 you sold this bond in the secondary market. If the market interest rate was 2% at that time, what price did you get for that bond?arrow_forward
- Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments ata rate of 5.875 percent. If these bonds have a market price of $981.13, what is the yield to maturity and effective annual yield can she expect to earn?arrow_forwardRudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds have a coupon rate of 6 percent and make semiannual coupon payments. What is the current market yield on this bond?arrow_forwardCarl buys a 7-year, $10,000 par value, 7% coupon bond. Exactly 4 years after purchasing the bond, he needs cash so he wants to sell the bond. If due to changes in the interest rate environment, the same bond would today only have a 6% coupon, what would be the fair price of the bond?arrow_forward
- An investor has the option toinvest in one of two bonds whose nominal price is € 1,000 and their coupon, paid annually, 11%. Bond X has a maturity of 5 years and Y is 15 years. Create a table with the price of the two bonds in the case where the discount rate is 8%, 11% and 14% respectively and briefly comment on the results. If the investor wants to minimize interest rate risk in which bond should he invest?arrow_forwardRuth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 5.875 percent. If these bonds have a market price of $981.13, what yield to maturity can she expect to earn?arrow_forwardYour broker offers to sell you a CleenWtr Bond for $1150. The bond has a coupon rate of 3%, semiannual interest payments, and a maturity of 9 years. If the interest rate on comparable debt is 2.0% is your broker fairly pricing the bond? (What is the curent price of the bond)arrow_forward
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Bond Valuation - A Quick Review; Author: Pat Obi;https://www.youtube.com/watch?v=xDWTPmqcWW4;License: Standard Youtube License