Question

Your organization is considering purchasing a general obligation term bond that makes semiannual interest payments. The bond has a face value of $12,000, a coupon rate of 6.5%, and will reach its maturity in 15 years. If the current market interest rate is 6.25% and the bond is being offered at a price of $12,500, from a financial perspective, the organization should (select one):

- A. purchase the bond
- B. not purchase the bond

Answer #1

We need to calculate the present value first

Semi annual period | Amount | Discount Factor | Present Value |

1 | 390 | 0.970 | $ 378.18 |

2 | 390 | 0.940 | $ 366.72 |

3 | 390 | 0.912 | $ 355.61 |

4 | 390 | 0.884 | $ 344.83 |

5 | 390 | 0.857 | $ 334.38 |

6 | 390 | 0.831 | $ 324.25 |

7 | 390 | 0.806 | $ 314.42 |

8 | 390 | 0.782 | $ 304.90 |

9 | 390 | 0.758 | $ 295.66 |

10 | 390 | 0.735 | $ 286.70 |

11 | 390 | 0.713 | $ 278.01 |

12 | 390 | 0.691 | $ 269.59 |

13 | 390 | 0.670 | $ 261.42 |

14 | 390 | 0.650 | $ 253.49 |

15 | 390 | 0.630 | $ 245.81 |

16 | 390 | 0.611 | $ 238.36 |

17 | 390 | 0.593 | $ 231.14 |

18 | 390 | 0.575 | $ 224.14 |

19 | 390 | 0.557 | $ 217.34 |

20 | 390 | 0.540 | $ 210.76 |

21 | 390 | 0.524 | $ 204.37 |

22 | 390 | 0.508 | $ 198.18 |

23 | 390 | 0.493 | $ 192.17 |

24 | 390 | 0.478 | $ 186.35 |

25 | 390 | 0.463 | $ 180.70 |

26 | 390 | 0.449 | $ 175.23 |

27 | 390 | 0.436 | $ 169.92 |

28 | 390 | 0.422 | $ 164.77 |

29 | 390 | 0.410 | $ 159.78 |

30 | 390 | 0.397 | $ 154.93 |

30 | 12000 | 0.397 | $ 4,767.19 |

$ 12,289.31 |

The present value of all benefits is 12,289

Current price is 12,500

So in this case it is costly should NOT PURCHASE

A corporation has a bond outstanding that makes semiannual
coupon interest payments. The coupon rate for the bond is 3.2
percent, the YTM (yield to maturity) is 4.5 percent, the par value
is $1,000 and the bond has 12 years to maturity. If interest rates
remain unchanged, what will the price of the bond be in 3
years?

A 30-year maturity bond with face value of $1,000 makes
semiannual coupon payments and has a coupon rate of 9.2%.
(Do not round intermediate calculations. Enter your answers
as a percent rounded to 3 decimal places.)
a.
What is the yield to maturity if the bond is selling for
$960?
Yield to maturity
%
b.
What is the yield to maturity if the bond is selling for
$1,000?
Yield to maturity
%
c.
What is the yield to maturity if...

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require a 10.7% nominal yield to maturity (YTM) on this
investment, what is the maximum price you should be willing to pay
for the bond?
Please show how this problem can be solved without a financial
calculator.

Assume that you are considering the purchase of a 14-year,
noncallable bond with an annual coupon rate of 7.70%. The bond has
a face value of $1000, and it makes semiannual interest payments.
If you require an 11.00% yield to maturity on this investment, what
is the maximum price you should be willing to pay for the bond?

Assume that you are considering the purchase of a 7-year bond
with an annual coupon rate of 4.5%. The bond has face value of
$1,000 and makes semiannual interest payments. If you require an
12.0% nominal yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond?

You are considering a corporate bond with 5% coupon bonds with
semiannual payments and a yield to maturity of 6% . The bonds
mature in 8 years. What is the market price per bond if the face
value is $1,000?

An investor is considering purchasing a bond with a 4.28 percent
coupon interest? rate, a par value of? $1,000?, and a market price
of? $673.71
The bond will mature in nine years. Based on this? information,
answer the following? questions:
a. What is the? bond's current? yield?
b. What is the? bond's approximate yield to?
maturity?
c. What is the? bond's yield to maturity using
a financial? calculator?
?Note: Assume coupon payments are paid annually

Assume that you are considering the purchase of a 10-year,
noncallable bond with an annual coupon rate of 5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 6% yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond?
Provide the correct excel function along with
inputs

Bond Dave has a 3 percent coupon rate, makes semiannual
payments, a 8 percent YTM, and 19 years to maturity. If interest
rates suddenly rise by 1 percent, what is the percentage change in
the price of Bond Dave?

Assume that you are considering the purchase of a 15-year bond
with an annual coupon rate of 9.5%. The bond has face value of
$1,000 and makes semiannual interest payments. If you require a 8%
nominal yield to maturity on this investment, what is the maximum
price you should be willing to pay for the bond?
Group of answer choices
925.28
961.57
1083.90
1,129.69
1040.72

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 32 minutes ago

asked 41 minutes ago

asked 41 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago