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IBM issued a twenty-five year, $75,000,000 bond issue on April 24 th, 2019 . The bonds had a 10% coupon rate and paid interest semiannually
IBM issued a twenty-five year, $75,000,000 bond issue on April 24 th, 2019 . The bonds had a 10% coupon rate and paid interest semiannually on October 23rd and April 23rd. At the time of issuance the market rate of interest was 14% (compounded semiannually). Determine the following: a. The price for which a $1,000 face value bond sold on the issue date. b. The price at which a $1,000 bond would be selling on October 24,2023 , if the market rate of interest had remained at 14%. c. The holding period yield (expressed as an APR) a bondholder would have earned by purchasing the bond on the issue date and selling it on October 24, 2023 (ignore transactions costs and taxes). Now assume that a single $1,000 bond from the April 24,2019 , bond issue sold for $1,351.83 on the issue date. On October 24, 2023, the market rate of interest was 11% (compounded semiannually). Determine the following: d. The yield-to-maturity (market rate) on the issue date (expressed as an APR). e. The price at which a $1,000 bond would be selling on October 24, 2023. f. The holding period yield (expressed as an APR) a bondholder would have earned by purchasing the bond on the issue date and selling it on October 24, 2023 (ignore transactions costs and taxes)
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