Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1) A bond with a face value of $1,000 has 14 years until maturity, carries a coupon rate of 7.6%, and sells for $1,089. a.

1) A bond with a face value of $1,000 has 14 years until maturity, carries a coupon rate of 7.6%, and sells for $1,089.

a. What is the current yield on the bond? (Enter your answer as a percent rounded to 2 decimal places.)

b. What is the yield to maturity if interest is paid once a year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.)

c. What is the yield to maturity if interest is paid semiannually? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.)

2) Maxcorps bonds sell for $1,223.64. The bond life is 9 years, and the yield to maturity is 8.8%. What is the coupon rate on the bonds? (Assume a face value of $1,000 and annual coupon payments.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

3) You buy a bond for $976 that has a coupon rate of 7.4% and a 5-year maturity. A year later, the bond price is $1,136. (Assume a face value of $1,000 and annual coupon payments.)

a.

What is the new yield to maturity on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b.

What is your rate of return over the year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

4) You buy a bond for $967 that has a coupon rate of 6.8% and a 8-year maturity. A year later, the bond price is $1,112. (Assume a face value of $1,000 and annual coupon payments.)

a.

What is the new yield to maturity on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b.

What is your rate of return over the year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Literacy And Money Script A Caribbean Perspective

Authors: Christine Sahadeo

1st Edition

3319770748, 978-3319770741

More Books

Students also viewed these Finance questions

Question

When should you arrive for the interview? What should you wear?

Answered: 1 week ago

Question

6. Identify characteristics of whiteness.

Answered: 1 week ago

Question

e. What are notable achievements of the group?

Answered: 1 week ago