Question
1)Cyberdyne Systems is issuing a series of zero coupon bonds to raise $500M to fund research and development at its Skynet division. Each bond will
1)Cyberdyne Systems is issuing a series of zero coupon bonds to raise $500M to fund research and development at its Skynet division. Each bond will have a face value of $1,000 and will mature in 26 years. The yield on the bond is 3%. What is the fair price for one of Cyberdyne's zero coupon bonds?
The fair price for one of Cyberdyne's zero coupon bonds is $_____
2)Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 22 years, for $213.50. Zero coupon bonds pay the investor the face value on the maturity date. What is the implicit interest in the first year of the bond's life?
The implicit interest in the first year of the bond's life is $____.
3)What is the percentage change in price for a zero coupon bond if the yield changes from 8.5% to 7.5%? The bond has a face value of $1,000 and it matures in 6 years. Use the price determined from the first yield, 8.5%, as the base in the percentage calculation.
The percentage change in the bond price if the yield changes from 8.5% to 7.5% is ____.
4)Beam Inc. bonds are trading today for a price of $1,160.73. The bond currently has 25 years until maturity and has a yield to maturity of 5.77%. The bond pays annual coupons and the next coupon is due in one year. What is the coupon rate of the bond?
The coupon rate of the bond is ___.
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