Question

Rocket Exterprices has a 20-year bond issue outstanding that pays a 4% coupon. The bond is currently priced at $1,205.60 and has par value of $1,000. The bond also pays coupons semiannually. You just purchase ten of them as an investment.

**1.) What is the yields to maturity of the bond you
hold?**

**2.) Five years fo by interest rates in the economy goes
up by 3% and Rocket Enterprises' bonds YTM also rises by 3%.
Unfortunately, you desperately need cash and will have to sell your
bonds. Your friend offers $885.00 for each bond. Would you sell to
your friend? Why?**

Answer #1

a)

- As the compounding is semiannual, the rate function is multiplied by 2.
- As the price was the amount paid to acquire the bond, it is an outflow and therefore represented by negative values while the coupon and the maturity value are inflows and therefore represented by positive signs

b) Price if the YTM rises

after 5 years pass there are only 15 years left to maturity. As the price is 833.07 nad the friend is offering 885, you should sell because you would only get 833.07 from the market and teh friend is giving you more.

Winston Enterprises has a 15-year bond issue outstanding that
pays a 9% coupon. The bond is currently priced at $894.60 and has a
par value of $1,000. Interest is paid semiannually. What is the
yield to maturity?

Anna May’s Pizza Co. has a 15-year bond issue outstanding that
pays a 9% coupon. The bond is currently priced at $894.60 and has a
par value of $1,000. Interest is paid semiannually. What is the
yield to maturity?

Sarsgaard Enterprises has a 15-year bond issue outstanding that
pays a 9 percent coupon semi-annually. The bond is currently priced
at $911.65 and has a par value of $1,000. What is the
yield-to-maturity of the bond?
5.08%
10.13%
10.16%
10.40%
None of the above

You are currently considering purchasing a 20 year, 8% bond that
pays coupon semiannually. You also determine that the current yield
to maturity (ytm) is 11%. In 5 years you decide to sell the bond
when the ytm is 6%. Compute the before tax holding period
return.

Issue Price of
a Bond
May Enterprises issued $200,000 of six percent, five-year bonds
with interest payable semiannually. Determine the issue price if
the bonds are priced to yield (a) six percent, (b) ten percent, and
(c) two percent.
Use financial
calculator or Excel to calculate answers. Round answers to the
nearest whole number.

on the issue date you bought a 20 year maturity 6%
semiannual coupon Bond the bond then sold at YTM of 7% now four
years later the similar Bond sells at YTM of 5% if you hold the
bond now what is your realized rate of return for the 4-year
holding.

On the issue date you bought a 20 year maturity, 6%
semiannual coupon Bond. The bond then sold at YTM of 7%. Now four
years later the similar Bond sells at YTM of 5%. If you hold the
bond now, what is your realized rate of return for the 4-year
holding.

Robert Smith just purchased a 10-year bond for $944. The bond
has a coupon rate of 8% and pays coupons semiannually. Robert does
not intend to hold the bond until maturity, instead, he plans to
sell the bond in exactly 5 years. What is the price Robert can sell
the bond for at this time?

Today you purchase a 9-year bond at a YTM of 10%. The bond pays
coupons annually and has a coupon rate of 9%. What is your 1-year
rate of return if you sell the bond 1-year from now at a YTM of
15%.

1) A bond will mature in 20 years. It has a 5% coupon rate and
will pay annual coupons. If the bond has a face value of $1,000 and
a 4% yield to maturity, what should be the price of the bond today?
What if YTM goes up to 5%? What if YTM goes up to 6%?
(2) What would be the price of the bond above in (1) if the
coupons were paid semiannually?
(3) What is the relationship...

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