Question

Bond A offers a coupon rate of 12%, has a remaining life of 10 years and...

Bond A offers a coupon rate of 12%, has a remaining life of 10 years and a face value of $1,000. Coupon payments for Bond A are paid semi-annually. If the yield to maturity on Bond A is 14%, what is Bond A’s current price?

a. $1,529.70
b. $1,114.70
c. $1,000.00
d. $894.06
e. $929.76
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer is as follows:

Coupon rate is 12% , since coupon are paid semiannually, hence coupon paymnet = ( coupon rate / 2 )*Face value

= (12% /2 ) * 1000

= 0.06 * 1000

= 60

Time to maturity is 10 years , So number of periods = Time to maturity * 2

= 10 * 2

= 20

Face value = 1000

Yield to maturity is 14 %, since paymnet is made semiannualy so,

Rate = yield / 2

= 14% / 2

= 7%

Price of the bond is calculated using as follows:

Price of the bond is $ 894.06. Therefore, option d. is correct.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
NO NEED FOR EXPLANATION 14. Your brother has just invested in a discount bond that offers...
NO NEED FOR EXPLANATION 14. Your brother has just invested in a discount bond that offers an annual coupon rate of 9%, with interest paid annually. The face value of the bond is $1,000 and the difference between its yield to maturity and coupon rate is 4%. The bond matures in 8 years. What is the bond’s price? * a. $808.05 b. $990.50 c. $750 d. $550 e. None of the above 13. Mining Fund has purchased a bond with...
A bond has a face value $1000, maturity of 10 years, and a coupon rate of...
A bond has a face value $1000, maturity of 10 years, and a coupon rate of 8%, paid semi-annually. Assuming the yield-to-maturity is 10%, the current price of the bond is:
1. A bond offers a coupon rate of 12%, paid annually, and has a maturity of...
1. A bond offers a coupon rate of 12%, paid annually, and has a maturity of 19 years. If the current market yield is 13% (discount rate), what should be the price of this bond? 2. A bond offers a coupon rate of 12%, paid semiannually, and has a maturity of 6 years. If the current market yield is 8%, what should be the price of this bond?
A) A Norwegian “oil”-bond has a 12 % coupon rate, matures in 20 years and pays...
A) A Norwegian “oil”-bond has a 12 % coupon rate, matures in 20 years and pays interest semi-annually. The face value is 1,000 NOK. What is the current price of this “oil”-bond if the market rate of return (e.g. the discount rate) is 8 %? B) Is this bond selling at par, premium or discount? C) What is the current yield? D) Is the yield to maturity (YTM) for this bond higher or lower than the current yield?
Johnston, Inc. is selling bonds for $775.37. Each bond has an 8% coupon rate and makes...
Johnston, Inc. is selling bonds for $775.37. Each bond has an 8% coupon rate and makes payments semi-annually. The bond matures in 25 years. What is the bond’s yield-to-maturity? Shieldsly, Inc. has a 9 percent coupon bond that matures in 5 years. The bond pays interest annually. What is the market price of a $1,000 face value bond if the yield to maturity is 7.56 percent? $1,126.64 $1,000.00 $1,146.13 $1,058.17 $363.55
A 9.3 percent coupon (paid semiannually) bond, with a $1,000 face value and 18 years remaining...
A 9.3 percent coupon (paid semiannually) bond, with a $1,000 face value and 18 years remaining to maturity. The bond is selling at $970. An 8.3 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $900. An 11.3 percent coupon (paid annually) bond, with a $1,000 face value and 6 years remaining to maturity. The bond is selling at $1,050. Round your answers to 3 decimal places!!!!. (e.g.,...
Microgates Industries bond has a 10 percent coupon rate and a $1,000 face value. Interest is...
Microgates Industries bond has a 10 percent coupon rate and a $1,000 face value. Interest is paid semi-annually, and the bond has 20 years to maturity. If investors require a 12 percent yield, what is the bond's value?
a) Johnson Motors’ bonds have 10 years remaining to maturity. Coupon interest is paid annually, the...
a) Johnson Motors’ bonds have 10 years remaining to maturity. Coupon interest is paid annually, the bonds have a $1,000 par value, and the coupon rate is 7 percent. The bonds have a yield to maturity of 8 percent. What is the current market price of these bonds? b) BSW Corporation has a bond issue outstanding with an annual coupon rate of 7 percent paid semiannually and four years remaining until maturity. The par value of the bond is $1,000....
A semi-annual coupon bond with 2 years to maturity and 8% per annum coupon rate has...
A semi-annual coupon bond with 2 years to maturity and 8% per annum coupon rate has a face value of $1,000 with a yield to maturity of 12% per annum (compounded semi-annually). Using the bond’s modified duration, estimate the new bond price when the yield to maturity immediately changes from 12% per annum to 8% per annum. Select one: a. 66.27 dollars.   b. 996.97 dollars. c. 930.70 dollars. d. 864.43 dollars. e. None of the statements is true.
A) As with most bonds, consider a bond with a face value of $1,000. The bond's...
A) As with most bonds, consider a bond with a face value of $1,000. The bond's maturity is 22 years, the coupon rate is 12% paid annually, and the discount rate is 12%. What is this bond's coupon payment? B) A bond offers a coupon rate of 14%, paid semiannually, and has a maturity of 6 years. Face value is $1,000. If the current market yield is 5%, what should be the price of this bond?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT