As a bond fund manager, you are considering corporate bonds issued by Super Buy (SB). Each SB bond is a 4-year bond with a par value of $1 million. Its interest payments are based on the following schedule: $50,000 in year 1, $60,000 in year 2, $70,000 in year 3, and $80,000 in year 4. You estimate SB's current interest rate is 6%. What is the actual bond price change if the YTM increases by 100 basis points? OA.-3.49% OB.3.42% O C.3.49% OD.-3.42% 7
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- Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?As a bond fund manager, you are considering 10-year corporate bonds issued by Mellon Bank (MB). Each MB bond has a $1,000 par value with 8% annual coupon rate. The coupons are paid semi-annually. The estimated rate of return on MB bond is 10%. What is the price of the bond? • A. $831.31 • B. $1,010.29 • C. $875.38 • D. $946.32 You purchase a 5-year corporate bond. The coupon rate of the bond is 6%, paid annually, and its par value is $1,000. The YTM is 4%. If you sell the bond one year later, what is your holding period return? • A. 3.5% • B. 0.5% • C. 1.7% • D. 4.0%As a bond fund manager, you are considering 10-year corporate bonds issued by Mellon Bank (MB). Each MB bond has a $1,000 par value with 8% annual coupon rate. The coupons are paid semi-annually. The estimated rate of return on MB bond is 10%. One year later, the yield increases to 11%. What is your holding period return of the bond? A. 8.20% B. 4.11% C. -6.79% D. -3.35%
- An investor gathers the following data on three newly-issued bonds: 1-year government bond, 3.0% yield 1-year ABC corporate bond, 4.2% yield 10-year government bond, 3.8% yield If investors require a 0.5% liquidity premium for corporate bonds, what are the components of the required return on a 10-year ABC bond?Based on the information above: ii. Chris Johnson fund managers has proposed him to invest on JigsawBerhad where the firm is setting the terms on a new issue of bonds withwarrants. The bonds will have a 30-year maturity and annual interestpayments. Each bond will come with 20 warrants that give the holder theright to purchase one share of share per warrant. The fund managerestimate that the value of each warrant will be RM10.50. The interest rateis 10 percent. Calculate the coupon rate should be set on the bonds-withwarrants so that the package would sell for RM1,000.Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds: Bond A has an 8% annual coupon, matures in 12 years, and has a $1,000 face value. Bond B has an 11% annual coupon, matures in 12 years, and has a $1,000 face value. Bond C has a 14% annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yield to maturity of 11%. The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Use a minus sign to enter negative values, if any. If an answer is zero, enter "0". A) Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par. Bond A is selling at because its coupon rate is the going interest rate. Bond B is selling at because its coupon rate is…
- Clifford Clark is a recent retiree who is interested in investing some ofhis savings in corporate bonds. His financial planner has suggested the following bonds:● Bond A has a 7% annual coupon, matures in 12 years, and has a $1,000 face value.● Bond B has a 9% annual coupon, matures in 12 years, and has a $1,000 face value.● Bond C has an 11% annual coupon, matures in 12 years, and has a $1,000 face value.Each bond has a yield to maturity of 9%.a. Before calculating the prices of the bonds, indicate whether each bond is trading at apremium, at a discount, or at par.b. Calculate the price of each of the three bonds.c. Calculate the current yield for each of the three bonds. (Hint: Refer to footnote 6 forthe definition of the current yield and to Table 7.1.)d. If the yield to maturity for each bond remains at 9%, what will be the price of eachbond 1 year from now? What is the expected capital gains yield for each bond? Whatis the expected total return for each bond?e. Mr. Clark is…The Bissette LLC Fund is looking to buy bonds with a $1,000 face value, an 8% coupon, payable semiannually, and a maturity of 5 years. Currently, the bond sells at $880.00. What is the yield to maturity?Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds: Bond A has a 9% annual coupon, matures in 12 years, and has a $1,000 face value. Bond B has a 10% annual coupon, matures in 12 years, and has a $1,000 face value. Bond C has an 8% annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yield to maturity of 9%.
- You are given the following information concerning a noncallable, sinking fund debenture: Principal: $1,000 Coupon rate of interest: 7 percent Term to maturity: 12 years Sinking fund: 3 percent of outstanding bonds retired annually; the balance at maturity If you buy the bond today at its face amount and interest rates rise to 12 percent after five years have passed, what is your capital gain or loss? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Use a minus sign to enter the loss amount, if any, as a negative value. Round your answer to the nearest dollar. $ If you hold the bond 12 years, what do you receive at maturity? -Principal or All coupon payments? What is the bond's current yield as of right now? Round your answer to the nearest whole number. % Given your price in a, what is the yield at maturity? Round your answer to the nearest whole number. % What proportion of the total debt issue is retired by the…HMK Enterprises would like to raise $10.0 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1,000 and a coupon rate of 6.59% (annual payments). The following table summarizes the yield to maturity for five-year (annual-payment) coupon corporate bonds of various ratings: Rating AAA AA A BBB BB YTM 6.19% 6.36% 6.59% 6.96% 7.54% a. Assuming the bonds will be rated AA, what will be the price of the bonds? b. How much of the total principal amount of these bonds must HMK issue to raise $10.0 million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number.) c. What must be the rating of the bonds for them to sell at par? d. Suppose that when the bonds are issued, the price of each bond is $961.60. What is the likely rating of the bonds? Are they junk bonds?Mark Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 4 years, a par value of $1,000, and a yield to maturity of 7.50%. The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.326% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon interest rate of 8.80% paid annually. If Mark invests in the Crabbe Waste Disposal bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.) If Mark invests in the Malfoy Enterprises bond, the value of the principal payment plus the value of his reinvestment account per bond is $_____ (Round to the nearest cent.) Why are the two values calculated in part d different? Mark would be better off investing in which one?