Question
I need the following answered. 5. What will be the yield (to maturity?) at the end of a ten-year bond with an annual interest rate
I need the following answered.
5. What will be the yield (to maturity?) at the end of a ten-year bond with an annual interest rate of 9%, and a nominal value of 1,000, which is sold for 887.00? If it is for sale 1,134.20? What does the fact that the bond is sold at or above par value mean for the relationship between rd and issue rate? (5 points)
6. What is the total return, current return and return on equity for the bond sold under par? (assume that the bond is held to maturity and the company does not default on the bond). (5 points)
7. How does the valuation equation of a bond change if the coupon payments are made every six months? Find the value of a ten-year bond with a issue rate of 10% and semi-annual coupon payments if the nominal interest rd is 13%. (5 points)
8. Suppose that a ten-year bond with a nominal value of 1,000 with a issuance rate of 10% and semi-annual coupon payments is sold today instead of 1,135.90, resulting in the formation of the nominal yield at maturity at 8%. The bond as can be withdrawn after five years at the price of 1,050.
(a) What is the nominal bond yield on revocation (YTC)? (2.5 points)
(b) If this bond is purchased, what is the investor most likely to earn. The yield to maturity YTM, or YTC (yield on revocation) and why? (2.5 points)
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