Question

5 years ago you purchased a 15 year $1,000 bond. The bond sells for $899.06. Comparable debt yields 11 percent. What is the bond's coupon rate?

10.85%

7.71%

8.66%

9.29%

9.81%

Answer #1

Answer is 9.29%.

Year | Present value factor @ 11% |

1 | 0.9009 |

2 | 0.8116 |

3 | 0.7312 |

4 | 0.6587 |

5 | 0.5935 |

6 | 0.5346 |

7 | 0.4817 |

8 | 0.4339 |

9 | 0.3909 |

10 | 0.3522 |

Total | 5.8892 |

Bond valuation is calculating the present value of a bond's future interest payments and the bond's value upon maturity.

Let X be the coupon.

899.08 = (X*5.8892) + (1000*0.3522)

899.08 - 352.20 = 5.8892X

546.86 / 5.8892 = X

X = 92.85811

Coupon is $ 92.86

Coupon rate is (92.86/ 1000) * 100

= 9.29%

Six years ago you purchased a 15-year $1,000 bond with a coupon
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A$900.16
B$700.24
C$661.42
D$1,029.69

A $1,000 bond has a coupon of 11 percent and matures after 15
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B$840.46
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You purchased a 20-year bond 15 years ago at a yield to maturity
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$1,000.00
$1,058.17
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You purchased a 15-year bond 12 years ago at a yield to maturity
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$995.88
$973.05
$965.31
$1,020.97

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a face value of $1,000. The bond pays interest semiannually at a
10% annual rate.
Questions: Show all calculations
What is the bond's price today if the coupon rate on comparable
new issues is 12%?
What is the price today if the coupon rate on comparable bonds
declines to 8%?
Explain the results of parts a) and b) in terms of opportunities
available to
investors. Specifically, comment on the...

4. Two years ago, you purchased a zero coupon bond with a 5-year
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rate of return on your investment?

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YTM today is 5%. If you sell the bond today, what is the annual
rate of return on your investment? v

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Its coupon interest rate was 6%, and its par value was $1,000. At
the time you purchased the bond, the yield to maturity was 4%. If
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the bond's yield to maturity had changed to 3%, your annual total
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Two years ago, you purchased a bond for $1036.67. The bond had
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Time
Prevailing Reinvestment Rate
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6.0%
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