Question

Arthur bought a semiannual coupon bond 12 years ago. The bond has a coupon rate of 9% and matures in 8 years. The next interest payment is scheduled for six months from today. If the yield on similar risk investments is 11.5%, what is the expected price of the bond two years from today?

Answer #1

Two years from today, the bond will have 6 years left until maturity.

Price of a bond is the present value of its cash flows. The cash flows are the coupon payments and the face value receivable on maturity

Price of bond is calculated using PV function in Excel :

rate = 11.5%/2 (Semiannual YTM of bonds = annual YTM / 2)

nper = 6 * 2 (6 years remaining until maturity with 2 semiannual coupon payments each year)

pmt = 1000 * 9% / 2 (semiannual coupon payment = face value * coupon rate / 2)

fv = 1000 (face value receivable on maturity)

PV is calculated to be $893.75

expected price of the bond two years from today is $893.75

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?...

Rick bought a 20-year bond when it was issued by Macroflex
Corporation 5 years ago (NOTE: the bond was issued 5 years ago. In
calculating price today, remember it has only 15 years remaining to
maturity). The bond has a $1,000 face value, an annual coupon rate
equal to 7 percent and the coupon is paid every six months. If the
yield on similar-risk investments is 5 percent,
a. What is the current market value (price) of the bond?
b....

2. Today, a bond has a coupon rate of 8.4 percent, par value of
1,000 dollars, YTM of 4.82 percent, and semi-annual coupons with
the next coupon due in 6 months. One year ago, the bond’s price was
1,041.94 dollars and the bond had 17 years until maturity. What is
the current yield of the bond today? Answer as a rate in decimal
format so that 12.34% would be entered as .1234 and 0.98% would be
entered as .0098.
3....

Rick bought a 25-year bond when it was issued by Macroflex
Corporation 10 years ago. The bond has a $1,000 face value and a
coupon rate equal to 7 percent and the coupon is paid every six
months. If the yield on similar-risk investments is 5 percent,
a) What is the current market value (price) of the bond?
b) Suppose interest rate levels rise to the point where such
bonds now yield 9 percent. What would be he price of...

Five years ago, Rock Steady Corp issued a semiannual coupon bond
with seven years until maturity. This bond was originally issued at
par with a $1,000 face value.
The coupon rate on the bond is 8%. Today, the yield-to-maturity
(YTM) is 10%.
Assume an investor bought the bond at the time it was issued and
sold it today. What is the holding period return for the five year
period of investment?
0.3389
0.3422
0.3654
0.3838

Five years ago, Rock Steady Corp issued a semiannual coupon bond
with seven years until maturity. This bond was originally issued at
par with a $1,000 face value.
The coupon rate on the bond is 8%. Today, the yield-to-maturity
(YTM) is 10%.
Assume an investor bought the bond at the time it was issued and
sold it today. What is the holding period return for the five year
period of investment? please provide step by step solution!

Five years ago, Rock Steady Corp issued a semiannual coupon bond
with seven years until maturity. This bond was originally issued at
par with a $1,000 face value. The coupon rate on the bond is 8%.
Today, the yield-to-maturity (YTM) is 10%. Assume an investor
bought the bond at the time it was issued and sold it today. What
is the holding period return for the five year period of
investment? Please provide the formula you used, and show your...

two
years ago you bought a bond wih a 5% coupon that matured ten years
from now. today the interest rate in similar bonds is 10%. this
bond now sells at?
a. discount
b. par value
c. premium

A semiannual coupon bond was issued 5 years ago today with a
maturity of 20 years. Its coupon rate is 8% and par value $1,000.
What is the current (today) bond price if the market interest is
6%?
a. $1,085.30
b. $1,000
c. $1,196
d. $1,231.15

A semiannual coupon bond was issued 5
years ago today with a maturity of 20
years. Its coupon rate is 8% and par value $1,000. What is the
current (today) bond price if the market interest
is 6%?
Group of answer choices
$1,196
$1,000
$1,085.30
$1,231.15

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