Concept explainers
A $5000 Mauranol, Inc., corporate bond matures in 10 years and has a coupon rate of 7.2% paid semiannually.
(a) If the yield rate is 8% compounded semiannually, find the bond’s market price.
(b) Three years later the yield rate is 5.8%. If the bondholder wants to sell at this time, what is the bond’s current market price?
(c) If you bought a $5000 Mauranol, Inc., bond at the price in part (a), collected 3 years of coupons, and sold at the price in part (b), what amount would you have earned on your original investment?
(d) Suppose you made a single investment with principal equal to the amount paid in part (a) and after 3 years received a single lump sum return equal to the amount from part (c). What interest rate compounded semiannually would you have earned?
Want to see the full answer?
Check out a sample textbook solutionChapter 6 Solutions
Mathematical Applications for the Management, Life, and Social Sciences
- Discrete Mathematics and Its Applications ( 8th I...MathISBN:9781259676512Author:Kenneth H RosenPublisher:McGraw-Hill EducationMathematics for Elementary Teachers with Activiti...MathISBN:9780134392790Author:Beckmann, SybillaPublisher:PEARSON
- Thinking Mathematically (7th Edition)MathISBN:9780134683713Author:Robert F. BlitzerPublisher:PEARSONDiscrete Mathematics With ApplicationsMathISBN:9781337694193Author:EPP, Susanna S.Publisher:Cengage Learning,Pathways To Math Literacy (looseleaf)MathISBN:9781259985607Author:David Sobecki Professor, Brian A. MercerPublisher:McGraw-Hill Education