Question

A corporate bond has a face value of $1000 with a maturity date 20 years from today. The bond pays interest semiannually at a rate of 8% based on the face value (this means 8%/yr/semi). The interest rate paid on similar corporate bonds has decreased to a current rate of 6%/yr/semi (this would be i – the yield rate). What is the market value of this bond, or what should an investor pay for the bond?

Answer #1

Face value = 1000

Coupon rate = 8%

Interest is paid semi-annually.

Coupon payment = (1000 * 0.08)/2 = 40

Market interest rate = 6% per annum compounded semi-annually

Since, market interest rate is compounded semi-annually.

Adjusted market interest rate = 6%/2 = 3%

Adjsted time period = 20 * 2 = 40

Calculate Bond Price -

Bond Price = PV of interest payment + PV of face value

Bond Price = 40(P/A, 3%, 40) + 1000(P/F, 3%, 40)

Bond Price = (40 * 23.1148) + (1000 * 0.3066)

Bond Price = 924.59 + 306.6

Bond Price = 1,231.19

**The market value of this
bond is $1,231.19**

A bond has a face value of $1000 with a time to maturity ten
years from now. The yield to maturity of the bond now is 10%.
a) What is the price of the bond today, if it pays no
coupons?
b) What is the price of the bond if it pays annual coupons of
8%?
c) What is the price today if pays 8% coupon rate
semi-annually?

A corporate bond has
17 years to maturity, a face value of $1,000, a coupon rate of 5.3%
and pays interest semiannually. The annual market interest rate for
similar bonds is 3.2% and is quoted as a semi-annually compounded
simple interest rate, i.e 1.6% per 6-month period.
What is the price of
the bond?

Q2: A corporate bond has 22 years to maturity, a face value of
$1,000, a coupon rate of 5.2% and pays interest semiannually. The
annual market interest rate for similar bonds is 3.3% and is quoted
as a semi-annually compounded simple interest rate, i.e 1.65% per
6-month period.
What is the price of the bond?

A corporate bond has 2 years to maturity, a coupon rate of 8%, a
face value of $1,000 and pays coupons semiannually. The market
interest rate for similar bonds is 9.5%. Duration is 1.886 years,
NPV is 973.25.
a. If yields fall by 0.8 percentage points,
what is the new expected bond price based on its duration (in
$)?
b. What is the actual bond price after the change in yields (in
$)?
c. What is the difference between the...

A bond has a face value $1000, maturity of 10 years, and a
coupon rate of 8%, paid semi-annually. Assuming the
yield-to-maturity is 10%, the current price of the bond is:

A corporate bond has 16 years to maturity, a face value of
$1,000, a coupon rate of 4.6% and pays interest twice a year. The
annual market interest rate for similar bonds is 3.4%.
What is the price of the bond (in $)?
2 years later, the market interest rate for similar bonds has
gone up to 4.4%. What is the new price of the bond (in
$)?

A bond issued by TOYOTA has 30 years to maturity with a face
value of $ 1000. The market's required yield to maturity for a
similar rated debt was 8.5% per annum. The coupon rate is 10.5%.
TOYOTA pays interest to bond holders on a semi annual basis on
January 15 and July 15.
Calculate the current price of the bond.
Bd :Price = -2 on 5 quantity + 940
Bs : Price= quantity + 500
a) In...

Chavez Industries, has an outstanding bond that has a $1000 face
value and a 6.4% coupon rate. Interest is paid semi-annually. The
bond has 7 years remaining until it matures. Today the interest
rate on similar risk bonds is 5.7% and it is expected to remain at
this level for many years in the future. Compute the following: A).
The bond’s current price B). The bond’s price one year from today
C). The current yield the bond will generate this...

Consider a coupon bond that has a face value of $1000, has a
yield of 16%,
pays a semi annual coupon of 70, and matures in one year. Assuming
that the
bond will pay the face value amount that the cost coupon payment on
the
maturity date. Calculate the price of the bond.

A convertible bond is selling for $800. It has 10 years to
maturity, a $1000 face value, and a 10% coupon paid semi-annually.
Similar nonconvertible bonds are priced to yield 14%. The
conversion price is $50 per share. The stock currently sells for
$31.375 per share. Determine the bond's option value.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 11 minutes ago

asked 15 minutes ago

asked 15 minutes ago

asked 21 minutes ago

asked 21 minutes ago

asked 24 minutes ago

asked 48 minutes ago

asked 53 minutes ago

asked 53 minutes ago

asked 56 minutes ago

asked 56 minutes ago