Question

Arjen owns investment A and 1 bond B. The total value of his holdings is 1,157 dollars. Investment A is expected to pay annual cash flows to Arjen of 128.37 dollars per year with the first annual cash flow expected later today and the last annual cash flow expected in 3 years from today. Investment A has an expected return of 16.42 percent. Bond B pays semi-annual coupons, matures in 19 years, has a face value of $1000, has a coupon rate of 7.6 percent, and pays its next coupon in 6 months. What is the yield-to-maturity for bond B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Answer #1

First let us find the value of bond B

investment A value=present value of future cash flows

=128.37+(128.37/(1+16.42%)^1)+(128.37/(1+16.42%)^2)+(128.37/(1+16.42%)^3)

=414.70

Value of B=total value-investment A

=1157-414.70=742.30

Use rate formulae in excel to find the yield to maturity of bond

=rate(nper,pmt,pv,fv,type)

nper=19*2(since semiannual)

pmt=face value*coupon rate=1000*(7.6%/2)=38

pv=-742.30

fv=1000

=rate(38,38,-742.30,1000,0,1)

=5.41%

annual YTM=5.41%*2=10.82%

answer is 0.1082

1. Arjen owns investment A and 1 bond B. The total value of his
holdings is 1,829 dollars. Investment A is expected to pay annual
cash flows to Arjen of 259.25 dollars per year with the first
annual cash flow expected later today and the last annual cash flow
expected in 4 years from today. Investment A has an expected return
of 12.37 percent. Bond B pays semi-annual coupons, matures in 19
years, has a face value of $1000, has...

#1) Cy owns investment A and 1 bond B. The total value of his
holdings is 900 dollars. Bond B has a coupon rate of 4.9 percent,
par value of $1000, YTM of 10.5 percent, 22 years until maturity,
and semi-annual coupons with the next coupon due in 6 months.
Investment A is expected to produce annual cash flows forever. The
next cash flow is expected to be 60.4 dollars in 1 year, and
subsequent annual cash flows are expected...

HW9 #8)
Arjen owns investment A and 1 bond B. The total value of his
holdings is 1,600 dollars. Investment A is expected to pay annual
cash flows to Arjen of 220.26 dollars per year with the first
annual cash flow expected later today and the last annual cash flow
expected in 3 years from today. Investment A has an expected return
of 17.75 percent. Bond B pays semi-annual coupons, matures in 13
years, has a face value of $1000,...

1. Cy owns investment A and 1 bond B. The total value of his
holdings is 1,517 dollars. Bond B has a coupon rate of 8.4 percent,
par value of $1000, YTM of 8.42 percent, 17 years until maturity,
and semi-annual coupons with the next coupon due in 6 months.
Investment A is expected to produce annual cash flows forever. The
next cash flow is expected to be 70.82 dollars in 1 year, and
subsequent annual cash flows are expected...

Cy owns investment A and 1 bond B. The total value of his
holdings is 1,891 dollars. Bond B has a coupon rate of 8.88
percent, par value of $1000, YTM of 7.18 percent, 14 years until
maturity, and semi-annual coupons with the next coupon due in 6
months. Investment A is expected to produce annual cash flows
forever. The next cash flow is expected to be 79.59 dollars in 1
year, and subsequent annual cash flows are expected to...

HW9 #5)
Cy owns investment A and 1 bond B. The total value of his
holdings is 1,899 dollars. Bond B has a coupon rate of 6.2 percent,
par value of $1000, YTM of 6.38 percent, 17 years until maturity,
and semi-annual coupons with the next coupon due in 6 months.
Investment A is expected to produce annual cash flows forever. The
next cash flow is expected to be 57.27 dollars in 1 year, and
subsequent annual cash flows are...

Demarius owns investment A and 1 share of stock B. The total
value of his holdings is 2,443.27 dollars. Investment A is expected
to pay annual cash flows to Demarius of 380 dollars per year with
the first annual cash flow expected later today and the last annual
cash flow expected in 6 years from today. Investment A
has an expected annual return of 11.56 percent. Stock B is expected
to pay annual dividends of 37.01 dollars forever with the...

Demarius owns investment A and 1 share of stock B. The total
value of his holdings is 2,196.22 dollars. Investment A is expected
to pay annual cash flows to Demarius of 250 dollars per year with
the first annual cash flow expected later today and the last annual
cash flow expected in 6 years from today. Investment A has an
expected annual return of 11.01 percent. Stock B is expected to pay
annual dividends of 43.2 dollars forever with the...

Tim owns investment A and 1 bond B. The total value of his
holdings is $4300. Investment A is expected TO PAY
ANNUAL CASH FLOWS TO Tim OF $650 per year with the first annual
cash flow expected later today and the last annual cash flow
expected in six years from today. Investment A has an expected
return of 13.81 percent. Bond B pays semi annual coupons, matures
in fifteen years, has a face value of $1000, has a coupon rate...

1. Castor owns one bond A and one bond B. The total value of
these two bonds is 2,593.9 dollars. Bond A pays semi-annual
coupons, matures in 14 years, has a face value of 1,000 dollars,
and pays its next coupon in 6 months. Bond B pays annual coupons,
matures in 15 years, has a face value of 1,000 dollars, has a
yield-to-maturity of 4.98 percent, and pays its next coupon in one
year. Both bonds have a coupon rate...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 6 minutes ago

asked 10 minutes ago

asked 10 minutes ago

asked 26 minutes ago

asked 35 minutes ago

asked 49 minutes ago

asked 49 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago