Question

Bond Valuation

**C)** Suppose that Joan just bought a 15-year bond
for $902.71. The bond has a coupon rate equal to 7 percent, and
interest is paid semiannually. What is the bond’s yield to maturity
(YTM)? If Joan holds the bond for the next three years and its YTM
does not change during that period, what return will she earn each
year? What portion of the annual return represents capital gains
and what portion represents the current yield?

**D)** Suppose that James just bought the same bond
that Joan bought, but he bought it two years later for $1,034.55.
If James plans to hold his bond for five years and its YTM does not
change during that period, what return will he earn each year? What
portion of the annual return represents capital gains and what
portion represents the current yield?

Answer #1

C)

Chapter 6 Spreadsheet
Problem
Bond
Valuation
Jenna bought a
bond that was issued by Sherlock Watson Industries (SWI) three
years ago. The bond has a $1,000 maturity value, a coupon rate
equal to 9 percent, and it matures in 17 years. Interest is paid
every six months; the next interest payment is scheduled for six
months from today.
a.
If the yield on similar risk investments is 12 percent, what is the
current market value (price) of the bond?...

3) A bond currently sells for $850. It has an
eight-year maturity, an annual coupon of $80 but paid
semi-annually, and a par value of $1,000. This bond has a
callable feature. If this bond can be called after 5 years, for
$1,025.
(1) What is its annual yield to maturity?
(2) What is its current yield?
(3) What is the bond’s nominal yield to call (YTC)?
(4) If you bought this bond, would you be more
likely to earn the YTM...

You just bought a newly issued bond which has a face value of
$1,000 and pays its coupon once annually. Its coupon rate is 5%,
maturity is 20 years and the yield to maturity for the bond is
currently 8%.
Do you expect the bond price to change in the future when the
yield stays at 8%? Why or why not? Explain. (No calculation is
necessary.)
2 marks)
Calculate what the bond price would be in one year if its...

Last year Carson Industries issued a 10-year, 15% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,075 and it sells for $1,280.
What are the bond's nominal yield to maturity and its nominal
yield to call? Do not round intermediate calculations. Round your
answers to two decimal places.
YTM: %
YTC: %
Would an investor be more likely to earn the YTM or the YTC?
-Select-Since the YTM...

Last year Carson Industries issued a 10-year, 15% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,075 and it sells for $1,180.
What is the bond's nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is the bond's nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%
Would an...

eBook Problem Walk-Through
Last year Carson Industries issued a 10-year, 15% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,075 and it sells for $1,270.
What are the bond's nominal yield to maturity and its nominal
yield to call? Do not round intermediate calculations. Round your
answers to two decimal places.
YTM: %
YTC: %
Would an investor be more likely to earn the YTM or the YTC?...

You just bought a bond that will mature in 3 years. The face
value of the bond is $1,000. The bond pays annual coupons at 6%
coupon rate. The yield to maturity of the bond is 6%.
What is the current price of the bond?
What is the return on the bond if you hold it for one year (you
sell it at the end of next year)? Explain.
Suddenly, the interest rates increased, so the new yield to
maturity...

1.A 6% annual coupon bond (par=$1,000) with 15 years to maturity
is selling for $1,050.
a.What is the bond’s Yield-to-Maturity (YTM)?
b.What is the bond’s current yield (CY)?
c.What is the bond’s capital gains rate or yield (CGY)?

BOND YIELDS
Last year Carson Industries issued a 10-year, 13% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,065 and it sells for $1,230.
What is the bond's nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is the bond's nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%...

BOND YIELDS
Last year Carson Industries issued a 10-year, 12% semiannual
coupon bond at its par value of $1,000. Currently, the bond can be
called in 6 years at a price of $1,060 and it sells for $1,300.
What is the bond's nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
What is the bond's nominal yield to call? Do not round intermediate
calculations. Round your answer to two decimal places.
%...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 1 minute ago

asked 4 minutes ago

asked 6 minutes ago

asked 13 minutes ago

asked 30 minutes ago

asked 32 minutes ago

asked 48 minutes ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago