CORPORATE FIN CUSTOM W/MYFINANCELAB
3rd Edition
ISBN: 9781323159859
Author: Berk
Publisher: PEARSON C
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Question
Chapter 6, Problem 18P
Summary Introduction
To determine: The price of the five year zero-coupon bond.
Introduction: A bond is a debt instrument with which the shareholder credits the cash to an entity which can be a government or an organization that scrounges finance for a distinct timeframe at a predefined interest rate. Coupon rate is expressed as an interest rate on a fixed income security similar to a bond. It is also known as the interest rate that the bondholders get from their investment. It depends on the yield depending on the day the bond is issued.
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29. Which of the following has the greatest interest rate (price) risk?a. A 10-year, $1,000 face value, 10 percent coupon bond with semiannualinterest payments.b. A 10-year, $1,000 face value, 10 percent coupon bond with annualinterest payments.c. A 10-year, $1,000 face value, zero coupon bond.d. A 10-year $100 annuity.e. All of the above have the same price risk since they all mature in 10years.
What is the present value of a security that will pay $7,000 in 20 years if securities of equal risk pay 7% annually? Do not round intermediate calculations. Round your answer to the nearest cent.
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Chapter 6 Solutions
CORPORATE FIN CUSTOM W/MYFINANCELAB
Ch. 6.1 - What is the relationship between a bonds price and...Ch. 6.1 - The risk-free interest rate for a maturity of...Ch. 6.2 - If a bonds yield to maturity does not change, how...Ch. 6.2 - Prob. 2CCCh. 6.2 - How does a bonds coupon rate affect its...Ch. 6.3 - How do you calculate the price of a coupon bond...Ch. 6.3 - How do you calculate the price of a coupon bond...Ch. 6.3 - Explain why two coupon bonds with the same...Ch. 6.4 - There are two reasons the yield of a defaultable...Ch. 6.4 - What is a bond rating?
Ch. 6.5 - Why do sovereign debt yields differ across...Ch. 6.5 - What options does a country have if it decides it...Ch. 6 - A 30-year bond with a face value of 1000 has a...Ch. 6 - Assume that a bond will make payments every six...Ch. 6 - The following table summarizes prices of various...Ch. 6 - Suppose the current zero-coupon yield curve for...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Suppose a five-year, 1000 bond with annual coupons...Ch. 6 - Prob. 8PCh. 6 - Explain why the yield of a bond that trades at a...Ch. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Consider the following bonds: Bond Coupon Rate...Ch. 6 - Prob. 14PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Suppose you are given the following information...Ch. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34P
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- 57: A security has a development worth of 100,000; its coupon rate is 4% and its yield is needed to be 8%. What might a purchaser pay for this security if the security is expected a long time from now?arrow_forwardSuppose tnat ABC bank decides to purchase a T-note and convert it into a STRIP. The T-note has a maturity of 6 years, pays a 6% coupon rate (semiannual) and a face value of $10,000. How many separate securities can be created? O 6O7O 12O13arrow_forwardConsider the following zero‐coupon yields on default free securities: Maturity (years) 1 2 3 4 5 Zero‐Coupon YTM 5.80% 5.50% 5.20% 5.00% 4.80% The price today of a 3 year default free security with a face value of $1000 and an annual coupon rate of 6% is closest to: A. $1024.36 B. $1021 C. $1013 D. $1032arrow_forward
- 1. If the current risk free rate is 2.3% and a particular security (priced today at $45) pays no dividends what is the best estimate of the one year futures price of this asset?(use at least 3 decimals)arrow_forwardRecall that on a one-year Treasury security the yield is 5.6100% and 6.7320% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.15%. What is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) a 9.6049% b 6.4285% c 8.6217% d 7.5629% Suppose the yield on a two-year Treasury security is 5.83%, and the yield on a five-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market’s estimate of the three-year Treasury rate two years from now? (Note: Do not round your intermediate calculations.) a 5.46% b 6.45% c 6.53% d 6.61%arrow_forward
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