Question

Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $46. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Answer #1

Given,

Yield to maturity = 10%

Semi annual interest payments =46

Maturity value = 1000

Maturity period = 20 years (*Since interest is paid semi annually we should consider maturity periods as 40 years (20*2))

Calculation of Maximum price payable for the bond:

Particulars | Time period | Cash Flows (1) | Yield to Maturity @10% (2) | Discounted Cash flows (3) (1*2) |

Interest | 1-40 | 46 | 9.7791 | 449.8386 |

Maturity value | 40 | 1000 | 0.0221 | 22.1 |

471.9386 |

Maximum price payable = 472 (Rounded off)

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Assume that you are considering the purchase of a 20-year,
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you require an 12.7% nominal yield to maturity on this investment,
what is the maximum price you should be willing to pay for the
bond?
a.
$901.80
b.
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c.
$1243.46
d.
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e.
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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 an 10.7% nominal yield to maturity on this investment,
what is the maximum price you should be willing to pay for the
bond?
a.
$874.74
b.
$721.44
c.
$1,000.99
d.
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e.
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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 work and explain formula of how you got this answer
NOT on excel)

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 7-year bond
with an annual coupon rate of 4.5%. The bond has face value of
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maximum price you should be willing to pay for the bond?

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noncallable bond with an annual coupon rate of 9.5%. The bond has a
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assume that you were considering the purchase of a 20 year
non-callable bond with an annual coupon rate of 9.5% the bond has a
face value of $1000 and it makes semi annual interest payments. if
you require a 9.5% nominal yield to maturity on this investment
what is the maximum price you should be willing to pay for the
bond?

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