Question

b.Suppose a ten-year, $1,000 bond with an 8.8% coupon rate and semiannual coupons is trading for $1,035.87.

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 9.6% APR, what will be the bond's price?

C. Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7.6% (annual payments). The yield to maturity on this bond when it was issued was 5.9%. What was the price of this bond when it was issued? When it was issued, the price of the bond was $____.

D. Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 5.5%. You hold the bond for five years before selling it.

a. If the bond's yield to maturity is 5.5% when you sell it, what is the annualized rate of return of your investment?

b. If the bond's yield to maturity is 6.5% when you sell it, what is the annualized rate of return of your investment?

c. If the bond's yield to maturity is 4.5% when you sell it, what is the annualized rate of return of your investment?

d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain.

Answer #1

1.

a)

FV = 1000

PV = 1035.87

Nper = 10 * 2 = 20

PMT = 1000 * 8.8% / 2 = 44

Yield to maturity can be calculated by using the following excel
formula:

=RATE(nper,pmt,pv,fv)*2

=RATE(20,44,-1035.87,1000)*2

= 8.27%

**Yield to maturity = 8.27%**

b)

Rate = 9.6% / 2 = 4.8%

Nper = 20

PMT = 1000 * 8.8% / 2 = 44

FV = 1000

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

=PV(rate,nper,pmt,fv)

=PV(4.8%,20,-44,-1000)

= $949.29

**Price of the bond = $949.29**

2.

FV = $1000

Nper = 10

PMT = 1000 * 7.6% = 76

Rate = 5.9%

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

=PV(rate,nper,pmt,fv)

=PV(5.9%,10,-76,-1000)

= $1,125.72

**Price of the bond = $1,125.72**

Note: Post the rest of the questions separately

Suppose a ten-year,$1,000 bond with an 8.8%coupon rate and
semiannual coupons is trading for$1,035.03.
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 9.6 % APR, what
will be the bond's price?
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
The bond's yield to maturity is____ (Round to two decimal
places.)
b. If the bond's yield to maturity...

Suppose a ten-year, $1,000 bond with an 8.3% coupon rate and
semiannual coupons is trading for $1,035.74.
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 9.6% APR, what
will be the bond's price?

Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and
semiannual coupons is trading for $1,034.44.
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 9.6% APR, what
will be the bond's price?

Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and
semiannual coupons is trading for $1,035.45.
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 9.2% APR, what
will be the bond's price?
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
The bond's yield to maturity is_____%. (Round to two decimal
places.)
b. If the bond's yield...

Suppose a ten-year, $1,000 bond with an 8.2% coupon rate and
semiannual coupons is trading for $1,035.92.
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?
a. What is the bond's yield to maturity (expressed as an APR
with semiannual compounding)?
The bond's yield to maturity is __%.
(Round to two decimal places.)
b. If the...

Suppose a ten-year, $1,000 bond with an 8.5 % coupon rate and
semiannual coupons is trading for $1,035.81.
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 9.2 % APR, what
will be the bond's price?

Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and
semiannual coupons is trading for $1,035.05.
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 9.4% APR, what
will be the bond's price?

Suppose a ten-year, $1,000 bond with an 8.2% coupon rate and
semiannual coupons is trading for $1,035.08.
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, $1,000 bond with an 8.1 % coupon rate and
semiannual coupons is trading for $ 1,034.88
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, $ 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?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 25 minutes ago

asked 39 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago

asked 4 hours ago

asked 4 hours ago