CFIN (with MindTap Finance, 1 term (6 months) Printed Access Card) (MindTap Course List)
6th Edition
ISBN: 9781337407342
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 17PROB
Summary Introduction
Current price of the
Price of the bond is the
Current yield: It is the ratio of the coupon payment to current price of the bond. It is used to measure the current
_________________________________
Calculate the current price of the bond as follows:
Calculate the current yield as follows:
Calculate the capital gain yield as follows:
D system has outstanding bonds that has face value of $1000 and coupon rate of 7%. Interest is paid semiannually on this bond. Yield to maturity is 10% and remaining time to maturity is 11 years
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Dynamic Systems has an outstanding bond that has a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. The bond has 11 years remaining until it matures. Today the going interest rate is 10 percent, and it is expected to remain at this level for many years in the future. Compute the (a) current yield and (b) capital gains yield that the bond will generate this year.
Enterprise, Inc. bonds have a 9 percent annual coupon rate. The interest is paid semiannually and the bond mature in eight years. Their par value is $1,000. If the market’s required yield to maturity on a comparable-risk bond is 8 percent, what is the value of the bond? What is its value if the interest is paid annually?
How to calculate this using mathematical calculation with formulas in finance?
XZYY, Inc. currently has an issue of bonds outstanding that will mature in 24 years. The bonds have a face value of $1,000 and a stated annual coupon rate of 13% with annual coupon payments. The bond is currently selling for $1100. The bonds may be called in 6 years for 115% of par value. What is your expected quoted annual rate of return if you buy the bonds and hold them until maturity?
Chapter 6 Solutions
CFIN (with MindTap Finance, 1 term (6 months) Printed Access Card) (MindTap Course List)
Knowledge Booster
Similar questions
- Dynamic Systems has an outstanding bond that has a $1,000 par value and a 9 percent coupon rate. Interest is paid semiannually. The bond has 10 years remaining until it matures. Today the going interest rate is 12 percent, and it is expected to remain at this level for many years in the future. Compute the current yield. Do not round intermediate calculations. Round your answer to two decimal places. % Compute the capital gains yield that the bond will generate this year. Do not round intermediate calculations. Round your answer to two decimal places. %arrow_forward) Consider buying a 1000 pbr bond at the market price of 800 pbr. The bond paysdividends semiannually at a rate of 8% per year over 10 years (i.e. The bond matures in 10 years).(a) Calculate the coupon rate?(b) Calculate the dividend amounts /Coupon interest payments.(c) Draw the cash flow diagram for the bond investment.(d) Calculate the effective annual yield.arrow_forwardConsider a level coupon bond that pays $500 every six months (beginning in the next period) for 3 years, plus an additional $1,000 in 3 years. Assume a constant annual interest rate of 10%. What is the price of the bond today?arrow_forward
- A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 9%, and sells for $1,100. Interest is paid annually. Assume a face value of $1,000 and annual coupon payments.a) If the bond has a yield to maturity of 9% 1 year from now, what will its price be at that time?b) What will be the rate of return on the bond? c) If the inflation rate during the year is 3%, what is the real rate of return on the bond? Assume annual interest payments.arrow_forwardA bond has 10 years until maturity, a coupon rate of 7.2%, and sells for $1,180. Interest is paid annually. (Assume a face value of $1,000.) If the bond has a yield to maturity of 10.8% 1 year from now, what will its price be at that time?arrow_forwardA bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 9%, and sells for $1,100. Interest is paid annually. Assume a face value of $1,000 and annual coupon payments. 1) If the bond has a yield to maturity of 9% 1 year from now, what will its price be at that time? 2) What will be the rate of return on the bond? 3) If the inflation rate during the year is 3%, what is the real rate of return on the bond? Please show workings with formulas.arrow_forward
- I would like to understand how to solve this in Excel. Hardware Inc. bonds are selling in the market for $960.45. These bonds carry a 9 percent coupon paid semiannually, and have 15 years remaining to maturity. What is the capital gain yield assuming that the interest rates will remain constant over the year?arrow_forwardYou are employed by an investment bank to estimate the value of a coupon-paying bond with the following features. It has a face value of $100,000, pays quarterly coupons at a rate of 10% p.a. and the market required yield to maturity is 8% p.a. compounding quarterly. There is one full quarter until the next payment will be received and the bond matures in 4 years. Which of the following is closest to the market value of the bond? Group of answer choices A) $106,789 B) Need more information to answer the question C) $105,288 D) $93,473 E) $94,871arrow_forwardYou are employed by an investment bank to estimate the value of a coupon-paying bond with the following features. It has a face value of $100,000, pays quarterly coupons at a rate of 10% p.a. and the market required yield to maturity is 8% p.a. compounding quarterly. There is one full quarter until the next payment will be received and the bond matures in 4 years. Which of the following is closest to the market value of the bond? A. $106,789 B. $105,288 C. $94,871 D.$93,473 E. Need more information to answer the question I calculated and I got $106,789, is it correct?arrow_forward
- The market price of TRUST bond is currently $890. Its par value is equal to $1,000 and it is expected to mature in 4 years. The coupon rate is equal to 4% and the yield to maturity is equal to 9% per year. Interest payments are made quarterly. Based on the aforementioned information, answer the following questions: a. The number of periods, N, is equal to: N = b. The yield to maturity, r, is equal to: (Report it in percent terms) r = % c. The coupon payment is equal to: Coupon payment = $ d. Calculate the value of the bond today. Use two decimal points. VB = $ e. Would you buy the bond today? ONot enough information ONO Yesarrow_forwardCrown Enterprises recently issued a bond that has a $1,000 face or par value. This bond has a coupon interest rate of 8% and has a life of 10 years. If interest is paid annually on this bond, calculate the market value today at t = 0 of this bond, assumed a required return for this bond of 6%. Now, assume that the required return on this bond increases to 10%. Assume also that the bond pays interest semi-annually, rather than annually. Given this new information, calculate the market value of this bond today at t = 0.arrow_forwardA bond has 10 years until maturity, a coupon rate of 8.9%, and sells for $1,110. Interest is paid annually. (Assume a face value of $1,000.) What will be the rate of return on the bond?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT