FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A year ago a corporation issued a 10 year bond with face value of $1,000 and coupon rate of 6.7% at par. today interest rates

A year ago a corporation issued a 10 year bond with face value of $1,000 and coupon rate of 6.7% at par. today interest rates have declined, causing the yield to maturity to drop by 1.31% versus the yield to maturity when the bond was issued last year. Calculate by what percentage the price of the bond has increased over the past year based on this decline in the yield-to-maturity.

Step by Step Solution

★★★★★

3.46 Rating (156 Votes )

There are 3 Steps involved in it

Step: 1

The price of the bond has increased by 925 percent over the past year As the bond was is... 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

Step: 3

blur-text-image

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

Fundamentals of Corporate Finance

Fundamentals of Corporate Finance

Authors: Richard Brealey, Stewart Myers, Alan Marcus

8th edition

77861620, 978-0077861629

More Books

Students also viewed these General Management questions

Question

★★★★★
What is the yield to maturity of the August 2005 Treasury bond? Compare the yield to maturity and the current yield. How do you explain thisrelationship? Today is February 15, 2008 Issue Coupom...

Answered: 1 week ago

Question

★★★★★
The yield to maturity for 10-year bonds is as follows for four different bond rating categories: The bonds of Falter Corporation were rated as Aaa and issued at par a few weeks ago. The bonds have...

Answered: 1 week ago

Question

★★★★★
What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you...

Answered: 1 week ago

Question

★★★★★
C.J mensah started a new park business called Jane park on February 1, 2016. The following selected events and transaction occurs during February. February 1. Invested $40,000 by issuing a common...

Answered: 1 week ago

Question

★★★★★
What point was economist John Maynard Keynes trying to make when he noted that "in the long run we're all dead"? How does the point Keynes was trying to make provide justification for a greater role...

Answered: 1 week ago

Question

★★★★★
Using your revised version of Message for Analysis 15. A, prepare a fully formatted print resume. What formatting changes would Sylvia Manchester need to make if she were uploading her resume to a...

Answered: 1 week ago

Question

★★★★★
=+Sample Lane 1 Lane 2 Lane 3 Lane 4 Lane 5 Lane 6 Lane 7 Lane 8 Lane 9 Lane 10 1 21.56 21.59 21.26 21.16 21.01 21.10 21.22 20.95 20.78 20.66 2 21.42 21.54 21.43 21.44 20.99 21.10 20.78 21.17 21.21...

Answered: 1 week ago

Question

★★★★★
Give examples of industries that are affected by seasonality. Why would these businesses want to filter out seasonality?

Answered: 1 week ago

Question

★★★★★
Along a stream line a ) Pressure is constant. b ) Stream Function is constant. c ) Velocity is constant. d ) All the above.

Answered: 1 week ago

Question

★★★★★
A gas consists of 20.0 mole% CH4, 30.0% C2H6, and 50.0% C2H4. Ten kilograms of this gas is to be compressed to a pressure of 200bar at 90C. Using Kays rule, estimate the final volume of the gas.

Answered: 1 week ago

Question

★★★★★
Differences in economic performance of nations, often described as economic growth, are often captured by the growth of GDP per capita. Algebraically, Let stand for the growth of GDP per capita, B...

Answered: 1 week ago

Question

★★★★★
Evan, Jennifer, and Nicole are studying probability for their MATH 108X exam. Evan explains that the probability of flipping a coin three times and getting heads all three times is 1/8. Jennifer...

Answered: 1 week ago

Question

★★★★★
EXPLAIN THE FOLLOWING RELATING TO ARTICLE 5 AND 6 OF PROFESSIONAL CODE OF ETHICS OF IMMIGRATION CONSULTANT IN THE ATTACHED CASE. EXPLAIN WHAT THE ARTICLE 5 AND 6 EXPECTS THE IMMIGRATION CONSULTANT TO...

Answered: 1 week ago

Question

★★★★★
Imagine it is currently the first day of 2019. The corporate tax rate is 40% and the WACC is estimated to be 13% pa. Suppose also that there is no surplus cash in any year and that Terminal Value...

Answered: 1 week ago

Question

★★★★★
Please solve all questions correctly, step by step. Chapter 11(3) 0 Saved Help Save& Exit Submit 10 Check my work 1 Problem 11-20 (Algo) Transfer Price with an Outside Market [LO11-3] Hrubec...

Answered: 1 week ago

Question

★★★★★
Explain clearly Suppose that the nominal interest rate is zero, that is R = 0. 1. What is the equilibrium quantity of credit card services? 2. In what sense does the economy run efficiently with R =...

Answered: 1 week ago

Question

★★★★★
This assignment provides practice programming with pointers and dynamically allocated arrays Provided for you is triangluarArraysMain.cpp, a file that contains a main function, along with functions...

Answered: 1 week ago

Question

★★★★★
The packaging division of a company having considered several alternative package designs for the company's new product has finally brought down their choices to two designs of which only one has to...

Answered: 1 week ago

Question

★★★★★
You may have heard big business criticized for focusing on short-term performance at the expense of long-term results. Explain why a firm that strives to maximize stock price should be less subject...

Answered: 1 week ago

Question

★★★★★
Maxcorp's bonds sell for $1,065.15. The bond life is 9 years, and the yield to maturity is 7%. What is the coupon rate on the bonds? (Assume annual coupon payments.)

Answered: 1 week ago

Question

★★★★★
A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8% interest on retirement savings. a. If...

Answered: 1 week ago

Question

★★★★★
What will be the future value after 6 years and 7 months of regular month-end investments of $435 earning 8.5% compounded monthly?

Answered: 1 week ago

Question

★★★★★
What is the appropriate price to pay for a contract guaranteeing payments of $1500 at the end of each quarter for the next 12 years? You require a rate of return of 6% compounded quarterly for the...

Answered: 1 week ago

Question

★★★★★
What percentage more funds will you have in your RRSP 20 years from now if you make fixed contributions of $3000 at the end of every six months for the next 20 years, instead of waiting 10 years and...

Answered: 1 week ago

Previous Question Next Question