Question

Suppose a 5-year bond with a 5% coupon rate, semiannual coupons and a face value of...

Suppose a 5-year bond with a 5% coupon rate, semiannual coupons and a face value of $1000 has a yield to maturity of 8% APR.

  1. What is the bond’s yield to maturity expressed as an effective semi-annual rate? What is the bond’s yield to maturity expressed as an effective annual rate (EAR)?

  2. What is the price of the bond?

  3. If the bond’s yield to maturity changes to 5% APR, what will the bond’s price be?

Homework Answers

Answer #1

Yield to maturity expressed as an effective semi-annual rate = APR/2 = 8%/2 = 4%

EAR = (1 + 0.08/2)^2 - 1

EAR = 0.0816

EAR = 8.16%

FV = 1,000

cpn = 1,000 * 0.05/2 = 25

r = 8%/2 = 0.04

n = 5 * 2 = 10 semi-annual payments

Bond's price with 8% APR yield to maturity is $878.3365633258

If the yield to maturity is changed to 5% APR, then...

r = 5%/2 = 0.025

Bond's price with an yield to maturity of 5% APR is $1,000

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
5) Suppose a 15-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading...
5) Suppose a 15-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for $1374.74. a. What is the bond’s yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond’s yield to maturity changes to 4% APR, what will the bond’s price be?
Q1.  Suppose a​ ten-year,  bond with a face value of $1000 an coupon rate 8.4% p.a. and semiannual...
Q1.  Suppose a​ ten-year,  bond with a face value of $1000 an coupon rate 8.4% p.a. and semiannual coupons is trading for 1034.59 a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​ compounding)? b. If the bond's yield to maturity changes to 9.1% APR, what will be the bond's price?
Suppose a​ ten-year $1000 bond with an 8% coupon rate and semiannual coupons is trading for...
Suppose a​ ten-year $1000 bond with an 8% coupon rate and semiannual coupons is trading for $1034.74. a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​ compounding)? b. If the​ bond's yield to maturity changes to ​9%APR, what will be the​ bond's price?
Suppose a​ ten-year, $ 1000 bond with an 8.4 % coupon rate and semiannual coupons is...
Suppose a​ ten-year, $ 1000 bond with an 8.4 % coupon rate and semiannual coupons is trading for $ 1035.35. a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​ compounding)? b. If the​ bond's yield to maturity changes to 9.5 % ​APR, what will be the​ bond's price?
Suppose a​ ten-year, $ 1000 bond with an 8.5 % coupon rate and semiannual coupons is...
Suppose a​ ten-year, $ 1000 bond with an 8.5 % coupon rate and semiannual coupons is trading for $ 1035.72 . a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​ compounding)? b. If the​ bond's yield to maturity changes to 9.3 % APR, what will be the​ bond's price?
Suppose a​ ten-year, $1000 bond with an 8.5% coupon rate and semiannual coupons is trading for...
Suppose a​ ten-year, $1000 bond with an 8.5% coupon rate and semiannual coupons is trading for $1035.32 a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​ compounding) b. If the​ bond's yield to maturity changes to 9.1% ​APR, what will be the​ bond's price
Suppose a 10 -year, $ 1,000 bond with a 10% coupon rate and semiannual coupons is...
Suppose a 10 -year, $ 1,000 bond with a 10% coupon rate and semiannual coupons is trading for a price of $ 1,127.31 a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 8% APR, what will the bond's price be?
Suppose a 10​-year, $ 1,000 bond with a 10% coupon rate and semiannual coupons is trading...
Suppose a 10​-year, $ 1,000 bond with a 10% coupon rate and semiannual coupons is trading for a price of $1,177.98. a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​ compounding)? b. If the​ bond's yield to maturity changes to 8 %8% ​APR, what will the​ bond's price​ be?
Suppose a 10 year bond with an 8/7% coupon rate and semi annual coupons is trading...
Suppose a 10 year bond with an 8/7% coupon rate and semi annual coupons is trading for $1035.91 a. What is the bonds yield to maturity ( expressed as an APR with semiannual compounding)? b. If the bonds yield to maturity changes to 9/1% APR what will be the bonds price?
Suppose a​ ten-year, $ 1,000 bond with an 8.9 % coupon rate and semiannual coupons is...
Suppose a​ ten-year, $ 1,000 bond with an 8.9 % coupon rate and semiannual coupons is trading for $ 1,034.56 a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​ compounding)? b. If the​ bond's yield to maturity changes to 9.9 % ​APR, what will be the​ bond's price?