Question
ASSIGNMENT ON BOND Part A An investor in bond has approached a bond analyst to ask him a few questions concerning his investment in fixed
ASSIGNMENT ON BOND
Part A
An investor in bond has approached a bond analyst to ask him a few questions concerning his investment in fixed income :
A. His investment in bond A has the following information
| Par Value | $4000 |
| Coupon | 8% |
| Maturity | 4years |
| YTM | 6% |
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Graphically show if the bond is trading at premium or discount [USE A SIMILAR GRAPH THAT I USED IN THE PPT]
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Calculate the value of the bond if the coupon is paid annually
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Calculate the value of the bond if the coupon is paid semi-annually
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If the market value of the bond is $4150, what will be the yield to maturity of the bond?
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What are the key characteristics of a bond ?
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Calculate the current yield of bond A.
Part B
Bond B has the following information
| Par Value | $1500 |
| Coupon | 8% |
| YTM | 5% |
| Maturity | 4 years |
| Market Value | $ 1650 |
[Is this bond overvalued or undervalued? Explain.
Hints : calculate the intrinsic value (IV) and compare with MV which is $1650]
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South Western Federal Taxation 2018 Essentials Of Taxation Individuals And Business Entities
Authors: William A. Raabe, James C. Young, Annette Nellen, David M. Maloney
21st Edition
978-0357109175, 978-1337386173
