Question

An inflation-indexed 3-year, annual 4% coupon bond issued by Thailand at par (Present Value =Par Value...

An inflation-indexed 3-year, annual 4% coupon bond issued by Thailand at par (Present Value =Par Value = 100 Thai Bhat initially). Inflation in Thailand increases by 5 % in year 1, by 4 % in year 2, and zero % in year 3. What is the maturity / face value of the bond in Thai Bhat at end of year 3?

a.

Bhat 109

b.

Bhat 100

c.

Bhat 109.2

d.

Bhat 103

Homework Answers

Answer #1

Answer - Option C (Bhat 109.2)

Calculation :-

Face Value of Bond in inflation-indexed bond = Face Value( 1 + Inflation rate)

Face Value of Bond in year 1 = 100(1.05)

Face Value of Bond in year 1 = 105 Thai Bhat

Face Value of Bond in year 2 = Face Value of Bond in year 1 ( 1 + Inflation rate)

Face Value of Bond in year 2 = 105(1.04)

Face Value of Bond in year 2 = 109.20 Thai Bhat

Face Value of Bond in year 3 = Face Value of Bond in year 2 ( 1 + Inflation rate)

Therefore;

Face Value of Bond in year 3 = 109.20(1)

Face Value of Bond in year 3 = 109.20 Thai Bhat

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
16. An inflation-indexed 3-year, annual 4% coupon bond issued by Thailand at par (Present Value =Par...
16. An inflation-indexed 3-year, annual 4% coupon bond issued by Thailand at par (Present Value =Par Value = 100 Thai Bhat initially). Inflation in Thailand increases by 5 % in year 1, by 4 % in year 2, and zero % in year 3. What is the maturity / face value of the bond in Thai Bhat at end of year 3? a. Bhat 103 b. Bhat 100 c. Bhat 109 d. Bhat 109.2
An inflation-indexed 3-year, annual 4% coupon bond issued by Thailand at par (Present Value =Par Value...
An inflation-indexed 3-year, annual 4% coupon bond issued by Thailand at par (Present Value =Par Value = 100 Thai Bhat initially). Inflation in Thailand increases by 5 % in year 1, by 4 % in year 2, and zero % in year 3. What is the coupon amount in Thai Bhat in year 2? a. Bhat 4.37 b. Bhat 4.20 c. Bhat 5.00 d. Bhat 4.00
There is a freshly issued 10-year inflation-linked bond with a face value of 1,000. Inflation in...
There is a freshly issued 10-year inflation-linked bond with a face value of 1,000. Inflation in the coming year is 3%. What is the principal at the beginning and end of this year and the coupon this year and next year, for A) a zero-coupon inflation indexed bond? B) a bond with 5% annual coupon rate that is interest-indexed, and C) a bond with a 5% coupon rate that is capital-indexed?
Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of...
Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of 6% paid annually. Assume you buy the bond at its face value of $1,000, and the inflation rate is 8%. a. What will be your cash flow at the end of the year? b. What will be your real return? c. What will be your nominal return?
Indexed bonds make payments that are tied to some price index. Consider a newly issued bond...
Indexed bonds make payments that are tied to some price index. Consider a newly issued bond with a three-year maturity, par value of $1,000, and a 5% coupon paid annually. Complete the following table Time Inflation Par Value Coupon Payment Par Value Payment 0 - $1,000 - - 1 4% 2 3% 3 2% Calculate the nominal and real returns for the second year and the third year.
Apple issued a 6 year bond with a par value of $2,000. The annual coupon rate...
Apple issued a 6 year bond with a par value of $2,000. The annual coupon rate is 2.4% and it pays semi-annually. The yield to maturity is 3.15%.      a) What is the purchase price for this bond?      b) What is the current yield for this bond?
What is the price of a $1000 face value zero-coupon bond with 4 years to maturity...
What is the price of a $1000 face value zero-coupon bond with 4 years to maturity if the required return on these bonds is 3%? Consider a bond with par value of $1000, 25 years left to maturity, and a coupon rate of 6.4% paid annually. If the yield to maturity on these bonds is 7.5%, what is the current bond price? One year ago, your firm issued 14-year bonds with a coupon rate of 6.9%. The bonds make semiannual...
The price today of a one-year zero coupon bond with face value £100 is £98. The...
The price today of a one-year zero coupon bond with face value £100 is £98. The price today of a two year 5% coupon bond (annual coupon payments) with face value £100 is £103. What is the price of a two-year zero coupon bond with face value £100?
Consider a 4-year, 5% annual coupon bond with a face value of $10,000, which was issued...
Consider a 4-year, 5% annual coupon bond with a face value of $10,000, which was issued three years ago. The bond just paid the coupon. Therefore, this bond has one year to maturity, and the next payment of the face and coupon will be made in exactly one year, after which the bond will cease to exist. If the bond defaults before next year, it will pay total of $8,000 in one year. The effective 1-year risk-free rate is 3.55%....
IBM has just issued a callable (at par) 10 year, 6% coupon bond with quarterly coupon...
IBM has just issued a callable (at par) 10 year, 6% coupon bond with quarterly coupon payments. The bond can be called at par in two year or anytime thereafter on a coupon payment date. It has a price of $97 per $100 face value. What is the bond’s yield to maturity? What is the bond's yield to call?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT