EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 6, Problem 22P
Summary Introduction
To determine: The amount would have to pay for a country U government bond.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Consider a U.S. government bond with as 63% coupon that expires in December 2020.The Par Value of the bond is $1,000. Coupon payments are made semiannually (June 30 and December 31 for this particular bond).
On January 1, 2016, the required yield is 5%. What is the current value？
Find the present value (as of January 1, 2016), of a 8% coupon bond with semi- annual payments, and a maturity date of December 2020 if the YTM is 5%.
Now assume that the required yield is 11%. How does this change the bond’s price?
a) At 21 February 2018, the US Government could borrow at an annual 10-year yield of 2.89%. At that yield, how much were financial markets paying for the right to receive $100 from the US Government 10 years later?
(b) Suppose a 5-year zero-coupon bond (??? = $100) issued by the US government is currently trading at $90. What is the annual yield an investor would receive for buying such a bond and holding it to maturity?
(c) Suppose the US Federal Reserve (the US Central Bank) wants to lower longer-maturity yields. Briefly explain the process (known as Quantitative Easing) it could use to achieve this.
In October 2010, you purchased a French government bond for €100 (face value) which pays a 1% coupon (nominal interest rate) every year until 2020. Today, in October 2014, similar bonds are issued at a 2% interest rate. What is the value of your bond today?
Chapter 6 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 6 - Prob. 1QTDCh. 6 - Prob. 2QTDCh. 6 - Prob. 3QTDCh. 6 - Prob. 4QTDCh. 6 - Prob. 5QTDCh. 6 - Prob. 6QTDCh. 6 - Prob. 7QTDCh. 6 - Prob. 8QTDCh. 6 - Prob. 9QTDCh. 6 - Prob. 11QTD
Ch. 6 - Prob. 12QTDCh. 6 - Prob. 13QTDCh. 6 - Prob. 14QTDCh. 6 - Prob. 15QTDCh. 6 - Prob. 16QTDCh. 6 - Prob. 17QTDCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- In November 2016 you purchase a 4 year US Government bond. The bond has an annual coupon rate of 6.25%, paid semi-annually. If investors demand a 0.950% semiannual return, what is the price of the bond? Select one: a. 55000 b. 1210 c. 430 d. 70arrow_forward) In October 2010, you purchased a French government bond for €100 (face value) which pays a 1% coupon (nominal interest rate) every year until 2020. Today, in October 2014, similar bonds are issued at a 2% interest rate. What is the value of your bond today? d) If the value of the above French bond was €100 today (in October 2014), what would be its implicit yield-to-maturity?arrow_forwardIn November 2014 you purchase a three-year U.S. government bond. The bond has an annual coupon rate of 4.25%, paid semiannually. If investors demand a 0.965% APR, what is the price of the bond? If you could demonstrate this solution in Excel, that would be appreciated.arrow_forward
- Assume that today is November 15, 2016 and there are exactly 4 six-month time periods remaining until maturity for a 30-year US Treasury bond that was originally issued on November 15, 1988. The bond matures on November 15, 2018. The bond’s coupon is 8.50%. Coupons are paid semi-annually. The yield to maturity is 0.67%. The bond’s principal is $1,000. Using the PVA formula, what is the current price of the bond? Begin with the general formula. Show all your work. Is the bond priced at a premium, discount, or at par? And, why? Explainarrow_forwardA particular country's treasury issued a 35-year bond on October 15, 2014, paying 5.625% interest. Thus, if you bought $100,000 worth of these bonds you would receive $5,625 per year in interest for 35 years. An investor wishes to buy the rights to receive the interest on $100,000 worth of these bonds. The amount the investor is willing to pay is the present value of the interest payments, assuming a 6% rate of return. Assuming (incorrectly, but approximately) that the interest payments are made continuously, what will the investor pay? HINT [See Example 6.] (Round your answer to the nearest cent.)arrow_forwardRefer to this chart and look at the Treasury bond maturing in March 2022. Required: How much would you have to pay to purchase one of these bonds? Note: Do not round intermediate calculations. Round your answer to 3 decimal places. What is its coupon rate? Note: Round your answer to 3 decimal places. What is the yield to maturity of the bond? Note: Do not round intermediate calculations. Round your answer to 3 decimal places.arrow_forward
- 3. Suppose the US government issued a 10 year, 10% semi-annual coupon bond on Jan 15, 2010. The face value is $1000, due on Jan. 15, 2020. a) On Jan. 16, 2016, the bond is traded on the secondary market for $800, what is the implied YTM on the bond? b) Also on Jan. 16, 2016, the US government issued a new bond, with 4 years to maturity, 7% semi-annual coupon rate, and face value of $1000. If the new bond and old bond have the same risk, what would be the YTM of the new bond? What should be the price of the new bond?arrow_forwardAt the end of March 2019, a Zambian corporate bond had a coupon rate of 6%, a par (face) value of K1,000 and will mature in March 2022. Market rates of interest are currently 4.5%.Required:A. Using the data given above and assuming semi-annual coupons and a semi-annual discount rate equal to 2.25%, calculate the value of the corporate bond.B. Calculate the Macaulay duration of the Zambian corporate bond described above assuming annual coupons and discount rate.C. Explain Macaulay duration and describe the main characteristics of Macaulay duration in relation to bonds.D. Explain modified duration and explain the limitations of using this measurearrow_forwardIf a bond issued on March 23, 2023 has par or face value of $1000.The bond will mature on March 22, 2032. The coupon rate is 7%, and coupons are paid semi-annually. If the market interest rate is 10%, what is the bond price when issued?arrow_forward
- Today is January 2, 2022, and investors expect the annual nominal risk-free interest rates in 2022 through 2024 to be: Year One-Year Rate (rRF) 2022 2.7 % 2023 1.9 2024 3.8 Assume the bonds have no risks. What is the yield to maturity for Treasury bonds that mature at the end of 2023 (a two-year bond)? Round your answer to one decimal place. __________ % What is the yield to maturity for Treasury bonds that mature at the end of 2024 (a three-year bond)? Round your answer to one decimal place. __________ %arrow_forwardA government bond has coupon yield 10.9%, face value of 4000 EUR, and maturity in 2026. The coupons are paid yearly. Today is 2022, and we just received a coupon. The government yield curve for time-to-maturity 4 years shows a yield of 5.0%. 1. What is the fair price of the bond today? 2. What is the duration of the bond?arrow_forwardAssume that it is February 15, 2012 and there are exactly 8 six-month time periods remaining until maturity for a 30-year US Treasury bond that was originally issued on February 15, 1986. This bond has a coupon rate of 9.25%. The coupons are paid semi-annually. The bond matures on February 15, 2016. The yield to maturity is 0.754%. The bond was sold in face value increments of $100. Using the PVA formula, what is the current price of the bond? Is this bond priced at a premium, at a discount, or at par? Why? Begin with the general formula. Show all your work. PV= $133.41arrow_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
Bond Valuation - A Quick Review; Author: Pat Obi;https://www.youtube.com/watch?v=xDWTPmqcWW4;License: Standard Youtube License