Question
Hi I have 2 Questions I need help on. Chapter 5 - Hello I need help with the following 4 questions on Business Finance. Q1.)
Hi I have 2 Questions I need help on.
Chapter 5 - Hello I need help with the following 4 questions on Business Finance.
Q1.) A General Power bond carries a coupon rate of 8.7%, has 9 years until maturity, and sells at a yield to maturity of 7.7%. (Assume annual interest payments.)
a.What interest payments do bondholders receive each year?
b.At what price does the bond sell?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price: ?
c.What will happen to the bond price if the yield to maturity falls to 6.7%?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price will ___?____ by _____?_______
Q2.) Consider three bonds with 5.90% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.
a.What will be the price of the 4-year bond if its yield increases to 6.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
b.What will be the price of the 8-year bond if its yield increases to 6.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
c.What will be the price of the 30-year bond if its yield increases to 6.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
d.What will be the price of the 4-year bond if its yield decreases to 4.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
e.What will be the price of the 8-year bond if its yield decreases to 4.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
f.What will be the price of the 30-year bond if its yield decreases to 4.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started