Question

Bond X is noncallable and has 20 years to maturity, a 8% annual coupon, and a $1,000 par value. Your required return on Bond X is 12%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 8.5%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will be worth at the end of 5 years.) Do not round intermediate calculations. Round your answer to the nearest cent.

$

Answer #1

Calculation of present value of the bond for the last 15 years:

FV = 1000

Nper = 15

PMT = 1000 * 8% = 80

Rate = 8.5%

Present value can be calculated by using the following excel
formula:

=PV(rate,nper,pmt,fv)

=PV(8.5%,15,-80,-1000)

= $958.48

Calculation of current price of the bond:

Nper = 5

Rate = 12%

PMT = 80

FV = 958.48

Current price of the bond can be calculated by using the
following excel formula:

=PV(rate,nper,pmt,fv)

=PV(12%,5,-80,-958.48)

= $832.25

**Current price of the bond = $832.25**

Bond X is noncallable and has 20 years to maturity, a 10% annual
coupon, and a $1,000 par value. Your required return on Bond X is
9%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 8.5%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...

Bond X is noncallable and has 20 years to maturity, a 9% annual
coupon, and a $1,000 par value. Your required return on Bond X is
10%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 8.5%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...

Bond X is noncallable and has 20 years to maturity, an 8% annual
coupon, and a $1,000 par value. Your required return on Bond X is
9%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 6.5%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...

Bond X is noncallable and has 20 years to maturity, a 8% annual
coupon, and a $1,000 par value. Your required return on Bond X is
12%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 10.5%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...

Bond X is noncallable and has 20 years to maturity, a 8% annual
coupon, and a $1,000 par value. Your required return on Bond X is
8%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 8%. How much should you be
willing to pay for Bond X today? (Hint: You will need to...

Bond X is noncallable and has 20 years to maturity, a 8% annual
coupon, and a $1,000 par value. Your required return on Bond X is
10%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 10.5%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...

(Bond Valuation)
Bond X is noncallable and has 20 years to maturity, an 8% annual
coupon, and a $1,000 par value. Your required return on Bond X is
9%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 7.5%. How much should you
be willing to pay for Bond X today? (Hint: You will...

Bond valuation Bond X is noncallable and has 20 years to
maturity, a 9% annual coupon, and a $1,000 par value. Your required
return on Bond X is 12%; and if you buy it, you plan to hold it for
5 years. You (and the market) have expectations that in 5, years
the yield to maturity on a 15-year bond with similar risk will be
9.5%. How much should you be willing to pay for Bond X today?
(Hint: You...

Bond X is noncallable and has 20 years to maturity, a 10% annual
coupon, and a $1,000 par value. Your required return on Bond X is
8%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 10%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...

Bond X is noncallable and has 20 years to maturity, a 11% annual
coupon, and a $1,000 par value. Your required return on Bond X is
12%; if you buy it, you plan to hold it for 5 years. You (and the
market) have expectations that in 5 years, the yield to maturity on
a 15-year bond with similar risk will be 9.5%. How much should you
be willing to pay for Bond X today? (Hint: You will need to...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 9 minutes ago

asked 10 minutes ago

asked 26 minutes ago

asked 29 minutes ago

asked 35 minutes ago

asked 37 minutes ago

asked 44 minutes ago

asked 45 minutes ago

asked 45 minutes ago

asked 54 minutes ago

asked 1 hour ago

asked 1 hour ago