Question

Suppose that on October 8, 2013 ACME Inc. issued 10-year coupon bonds with a face value...

Suppose that on October 8, 2013 ACME Inc. issued 10-year coupon bonds with a face value of $1,000 and coupon payments of $100. (the coupons are paid each year on October 8, starting with the year 2014). Suppose that on October 8, 2013, ACME bonds sold for $950.

5. What can you say about the value of the the yield to maturity paid by ACME bonds, without calculating it?

Suppose that in 2017 the interest rate decreases to 10%.

6. What events might lead to a decrease in interest rate? List at least two such events. Explain.

7. What should be the price of an ACME bond today? What should be the price of an ACME bond one year from today?

8. If you buy a bond today with the intent on selling it next year, What rate of return do you expect? What is the current yield and the rate of capital gain?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Acme Inc. just issued a bond with a​ $10,000 face value and a coupon rate of​...
Acme Inc. just issued a bond with a​ $10,000 face value and a coupon rate of​ 7%. If the bond has a life of 30​ years, pays semi−annual coupons, and the yield to maturity is​ 9%, what will the bond sell​ for?
Apple Inc has a bond with $1000 face value and a coupon rate of 8%, and...
Apple Inc has a bond with $1000 face value and a coupon rate of 8%, and Apple Inc has another bond with $1000 face value and a coupon rate of 12%. Both bonds pay coupon payment on January 1st in each year. Both bonds have 10-year maturities from today (January 2, 2010) and both sell at a yield to maturity of 10%. Suppose their yields to maturity next year are still 10%. Now, suppose you purchase two bonds today (January...
A Chinese steel producer has issued a 3-year, 8 percent coupon bond with face value RMB...
A Chinese steel producer has issued a 3-year, 8 percent coupon bond with face value RMB 1,000,000. i) How much is this bond worth to you if the interest rate is 8%? ii) How much is this bond worth to you if the interest rate is 10%? iii) Suppose you buy this bond at par and hold it for one year. When you sell the bond, after the coupon for the first year having been paid, the interest rate is...
1. Ahmad Corp. just issued ten-year bonds that make annual coupon payments of $50. suppose you...
1. Ahmad Corp. just issued ten-year bonds that make annual coupon payments of $50. suppose you purchased one of these bonds at par value ($1,000) when it was issued. Right after your purchase, market interest rates jumped, and the YTM (interest rate) on your bond rose to six percent. What is the new price of you bond? 2. Assume a bond matures for $1000 six years from today and has a 7% coupon rate with semiannual coupons. What is the...
Suppose a 10 year bond with an 8/7% coupon rate and semi annual coupons is trading...
Suppose a 10 year bond with an 8/7% coupon rate and semi annual coupons is trading for $1035.91 a. What is the bonds yield to maturity ( expressed as an APR with semiannual compounding)? b. If the bonds yield to maturity changes to 9/1% APR what will be the bonds price?
a 10-year bond, $1,000 face value bond with a 8% coupon rate and semi-annual coupons has...
a 10-year bond, $1,000 face value bond with a 8% coupon rate and semi-annual coupons has a yield to maturity of 12%. the bond should be trading at the price of? round to nearest cent
Consider a 10-year coupon bond with a face value of $1000, coupon payments of $50, and...
Consider a 10-year coupon bond with a face value of $1000, coupon payments of $50, and priced at $1020 today. Assume that you expect its price to be $950 in 1 year. Which of the following measures would indicate the highest rate? Select one: Coupon rate Yield to maturity Rate of return over a holding period of 1 year. Current yield
1. A $1,000 face value bond of Acme Inc. pays an annual coupon and carries a...
1. A $1,000 face value bond of Acme Inc. pays an annual coupon and carries a coupon rate of 8.25%. It was a 30 year bond when issued and it has 11 years remaining to maturity. If it currently has a yield to maturity of 5.75%. (a) What interest payments do bondholders receive each year? (b) What is the current bond price? (c) What is the bond price if the yield to maturity rises to 7.625%?
Suppose a 10-year, $1,000 bond with an 8% coupon rate and semiannual coupons is trading for...
Suppose a 10-year, $1,000 bond with an 8% coupon rate and semiannual coupons is trading for $1,034.74. A: What is the bond’s yield to maturity (expressed as an APR with semiannual compounding)? Coupon? Number of periods? Yield to Maturity? B: If the bond’s yield to maturity changes to 9% APR, what will the bond’s price be? Semi-annual yield? Bond Price?
1.) Last year Janet purchased a $1,000 face value corporate bond with an 8% annual coupon...
1.) Last year Janet purchased a $1,000 face value corporate bond with an 8% annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expected yield to maturity of 12.09%. If Janet sold the bond today for $1,055.86, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. 2.) Bond X is noncallable and has 20 years to maturity, a...