Question
Homework help covering bonds and their valuations. The homework is pasted below. Thank you. 1.Draw a time line showing the cash flows for a bond
Homework help covering bonds and their valuations. The homework is pasted below. Thank you.
1.Draw a time line showing the cash flows for a bond that has a four year maturity, semiannual coupon payments, a coupon rate of 5 percent, and a par value of $1,000.
2.Using the information in question 4, value the bond under the following interest rate assumptions:
a.Market Rate = 3%
b.Market Rate = 5%
c.Market Rate = 7%
3.Assuming the market rate is 6.5 percent, what is the value of a bond that pays an annual coupon payment, a coupon rate of 8 percent, a par value of $1,000, and a maturity of 10 years.
a.Is the bond in question 6 selling for a discount, premium, or par?
4.Find the yield to maturity (YTM) for a bond with the following characteristics: Maturity = 15 years, Coupon Rate = 10%, Coupon Payments made Annually, Par = $1,000.
a.Bond Selling Price = $1,125
b.Bond Selling Price = $1,000
c.Bond Selling Price = $975
5.Assume that a bond has a coupon rate of 10 percent, makes annual coupon payments, and has a par value of $1,000. Calculate the bond's value under the following conditions.
a.The bond matures in 5 years and the YTM is 5%:
b.The bond matures in 5 years and the YTM is 10%:
c.The bond matures in 5 years and the YTM is 15%:
d.The bond matures in 15 years and the YTM is 5%:
e.The bond matures in 15 years and the YTM is 10%:
f.The bond matures in 15 years and the YTM is 15%:
6.Looking at the prices that you calculated in problem 8, what effects do time and YTM have on a bond's price?
7.Calculate the single and annual coupon payments assuming the following:
a.Semiannual bond, Coupon rate of 8 percent, Par value of $1,000:
b.Annual bond, Coupon rate of 4.5 percent, Par value of $100:
c.Monthly bond, Coupon rate 12 percent, Par value $850:
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