Six years ago, Junk Removal Services (JRS) issued high-yield bonds at par with a maturity of...
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Six years ago, Junk Removal Services (JRS) issued high-yield bonds at par with a maturity of 12 years and a face value of $1,000. Today, the bonds just paid their semi-annual coupons of $70. 20. At the time when the bonds were issued, six years ago, what was the yield-to-maturity (APR, semi- annually compounded) of these bonds? 21. Today, suppose the yield-to-maturity (APR, semi-annually compounded) is 12%. What would be the price of one JRS bond today (right after the 12th coupon payment)? 22. Suppose six months before maturity of the bond (right after the bond made its 23rd coupon payment), the yield-to-maturity (APR, semi-annually compounded) is 20%. If you bought a bond right after it made its 23rd coupon payment and held it until maturity, what would be your return on this investment? 23. Today, Bond Analyst Corp. uses the duration concept to approximate what happens to JRS bond prices if interest rates change. They predict that if interest rates increased by 1 percentage point, the price of JRS bonds would decline by 4.3%. Based on this information, what is the duration Bond Analyst Corp. calculated for JRS bonds? 24. Suppose in 5.5 years from now, you must invest $195,000 in bonds. You can choose between JRS bonds (they just paid their 23th coupon) or 6-month zero coupon bonds with a yield-to-maturity of 5%. If you want to bet on a decrease in interest rates, which bonds would you purchase (you can purchase fractions of these bonds)? Six years ago, Junk Removal Services (JRS) issued high-yield bonds at par with a maturity of 12 years and a face value of $1,000. Today, the bonds just paid their semi-annual coupons of $70. 20. At the time when the bonds were issued, six years ago, what was the yield-to-maturity (APR, semi- annually compounded) of these bonds? 21. Today, suppose the yield-to-maturity (APR, semi-annually compounded) is 12%. What would be the price of one JRS bond today (right after the 12th coupon payment)? 22. Suppose six months before maturity of the bond (right after the bond made its 23rd coupon payment), the yield-to-maturity (APR, semi-annually compounded) is 20%. If you bought a bond right after it made its 23rd coupon payment and held it until maturity, what would be your return on this investment? 23. Today, Bond Analyst Corp. uses the duration concept to approximate what happens to JRS bond prices if interest rates change. They predict that if interest rates increased by 1 percentage point, the price of JRS bonds would decline by 4.3%. Based on this information, what is the duration Bond Analyst Corp. calculated for JRS bonds? 24. Suppose in 5.5 years from now, you must invest $195,000 in bonds. You can choose between JRS bonds (they just paid their 23th coupon) or 6-month zero coupon bonds with a yield-to-maturity of 5%. If you want to bet on a decrease in interest rates, which bonds would you purchase (you can purchase fractions of these bonds)?
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Answer rating: 100% (QA)
20 To calculate the yieldtomaturity of the bonds when they were issued six years ago we need to find the annual coupon payment 70 2 140 the number of ... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 9781119607519
4th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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