Question

A bond pays a 10.2% coupon on a semi-annual basis. The par value is $1000, and...

A bond pays a 10.2% coupon on a semi-annual basis. The par value is $1000, and the maturity is 15 years. If your required rate is 8%, how much would you be willing to pay for the bond?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Par Value = $1,000

Annual Coupon Rate = 10.20%
Semiannual Coupon Rate = 5.10%
Semiannual Coupon = 5.10% * $1,000
Semiannual Coupon = $51

Time to Maturity = 15 years
Semiannual Period = 30

Annual YTM = 8.00%
Semiannual YTM = 4.00%

Current Price = $51 * PVIFA(4.00%, 30) + $1,000 * PVIF(4.00%, 30)
Current Price = $51 * (1 - (1/1.04)^30) / 0.04 + $1,000 * (1/1.04)^30
Current Price = $51 * 17.292033 + $1,000 * 0.308319
Current Price = $1,190.21

Therefore, you should pay $1,190.21 for this bond.

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
Consider a $1,000 par value bond with a 9% annual coupon. The bond pays interest annually....
Consider a $1,000 par value bond with a 9% annual coupon. The bond pays interest annually. There are 20 years remaining until maturity. You have expectations that in 5 years the YTM on a 15-year bond with similar risk will be 7.5%. You plan to purchase the bond now and hold it for 5 years. Your required return on this bond is 10%. How much would you be willing to pay for this bond today? Select one: a. $1044 b....
Consider a $1,000 par value bond with a 9% annual coupon. The bond pays interest annually....
Consider a $1,000 par value bond with a 9% annual coupon. The bond pays interest annually. There are 20 years remaining until maturity. You have expectations that in 5 years the YTM on a 15-year bond with similar risk will be 7.5%. You plan to purchase the bond now and hold it for 5 years. Your required return on this bond is 10%. How much would you be willing to pay for this bond today? Select one: a. $1132 b....
A $1000 par value bond has a coupon rate of 7.7%, pays interest semi-annually, matures in...
A $1000 par value bond has a coupon rate of 7.7%, pays interest semi-annually, matures in 22 years, and is priced at a 82.97 discount from par value. What is the annual yield to maturity of this bond? (Answer to the nearest one hundedth of a percent, i.e., 1.23 but do not include the % sign).
What is the present value of a $1000 par value bond that pays 7% coupon rate,...
What is the present value of a $1000 par value bond that pays 7% coupon rate, payable semi-annually and it matures in 15 years? The yield to maturity for this bond is 6%. $1,224.20 $1,102.18 $1,098.00 $1,097.12
A 8-year bond with a face value of $1000 pays semi-annual coupons at j2= 10.2%. If...
A 8-year bond with a face value of $1000 pays semi-annual coupons at j2= 10.2%. If the bond sells for $1272.59 to yield an investor j2= 7.1%, what is the redemption value?
Your good friend is looking to buy a bond that pays semi-annual interest. The par value...
Your good friend is looking to buy a bond that pays semi-annual interest. The par value is $1,000 and the coupon rate is 4%. Your friend plans to hold the bond to its maturity, which is 10 years from now. If her required rate of return is 3%, what is the most you recommend your friend pay for the bond? (round to nearest cent)
A $1000 par value bond pays 6% coupon rate, payable semi-annually and it matures in 12...
A $1000 par value bond pays 6% coupon rate, payable semi-annually and it matures in 12 years and it is worth $900 today. What is yield to maturity for this bond? 7.68% 7.26% 3.16% 3.63%
You are reviewing a $1,000 par value bond that pays 6.8% semi-annual coupon interest, and has...
You are reviewing a $1,000 par value bond that pays 6.8% semi-annual coupon interest, and has 10 years before it matures. 1a. You (and other investors) currently require a nominal annual rate of 7.5 percent for this bond. In other words, the comparable bonds have a YTM of 7.5%. How much should you be willing to pay for this bond today?\ 1b. If you buy this bond today and hold it for 5 years. You are planning to sell it...
You are considering buying a semi-annual coupon bond with a stated coupon rate of 14 %...
You are considering buying a semi-annual coupon bond with a stated coupon rate of 14 % (note that the stated rate is in annual terms). There are 23 years to maturity remaining on it. Your required rate of return is 13.0 % per year, How much should you be willing to pay for this bond?
A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid annually....
A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid annually. What is the value of the bond if your required rate of return is 5%? 2. A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid semi-annually. What is the value of the bond if your required rate of return is 5%? 3.  A $1,000 par-value bond with 5 years of maturity pays a 5% coupon rate, paid semi-annually. What...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT