Question

(Bond valuation) At the beginning of the year, you bought a $1,000
per value corporate bond with an annual coupon rate of 8 percent
and a maturity date of 15 years. When you bought the bond, it had
an expected yield to maturity of 11 percent. Today the bond sells
for $920.

a. What did you pay for the bond?

b. If you sold the bond at the end of the year, what would be
your one-period return on the investment? Assume that you did not
receive any interest payment during the holding period.

Answer #1

A. Value of the bond today

Bond yields coupon rate of 11 percent

Thus coupon amount will be Bond value * Coupon rate

i.e. 1000*8%= 80

Value of Bond = Present Value of Principal Price + Present Value of Coupon amount

= 1000 * Present Value Interest Factor(11,15) + 80 * Present Value Annuity Factor (11,15)

= 1000*0.2090 + 80* 7.1908

= 209 + 575.27

= 784

Thus Value of Bond will be approximately Rs.784

B. Based on the above answer the buying value will be Rs.784 and the selling value as per question is Rs.920

Thus the beneficial return will be 136

As interest is not to be considered net return will be Rs.136

Thus one year period return will be considered as : Return / Bond Value * 100

: 136/784 *100

: 17.35%

Thus net return will be 17.35 % without consideration of interest

(Bond valuation) At the beginning of the year, you bought a
$ 1,000 par value corporate bond with an annual coupon rate of 14
percent and a maturity date of 15 years. When you bought the bond,
it had an expected yield to maturity of 16 percent. Today the bond
sells for $ 1,000. a. What did you pay for the bond? b. If you
sold the bond at the end of the year, what would be your
one-period return...

(Bond valuation) At the beginning of the year, you bought a
$1000 par value corporate bond with an annual coupon rate of 16
percent and a maturity date of 15 years. When you bought the bond,
it had an expected yield to maturity of 8 percent. Today the bond
sells for $1970.
a. What did you pay for the bond?
b. If you sold the bond at the end of the year, what would be
your one-period return on the...

At the beginning of the? year, you bought a ?$1000 par value
corporate bond with an annual coupon rate of 13 percent and a
maturity date of 12 years. When you bought the? bond, it had an
expected yield to maturity of 12 percent. Today the bond sells for
?$1200.
a. What did you pay for the? bond?
b. If you sold the bond at the end of the? year, what would be
your? one-period return on the? investment? Assume...

At the beginning of the year, you bought a $1000 par value
corporate bond with an annual coupon rate of
15 percent and a maturity date of 13 years. When you bought the
bond, it had an expected yield to maturity of
16 percent. Today the bond sells for $1060.
a. What did you pay for the bond?
b. If you sold the bond at the end of the year, what would be
your one-period return on the investment? Assume...

One year ago, you bought a bond at a price of $992.6000.The bond
pays coupons semi-annually, has a coupon rate of 6% per year, a
face value of $1,000 and would mature in 5 years. Today, the bond
just paid its coupon and the yield to maturity is 8%. What is your
holding period return in the past year? (suppose you did not
reinvest coupons)

You just bought a newly issued bond which has a face value of
$1,000 and pays its coupon once annually. Its coupon rate is 5%,
maturity is 20 years and the yield to maturity for the bond is
currently 8%.
Do you expect the bond price to change in the future when the
yield stays at 8%? Why or why not? Explain. (No calculation is
necessary.)
2 marks)
Calculate what the bond price would be in one year if its...

You have just purchased a $1,000 bond with 7% annual coupon and
maturity in 10 years.
If the yield‐to‐maturity is 6%, how much did you pay for the
bond?
If, 1 year later and on the day after you receive the first
coupon, the bond’s yield‐to‐maturity goes up to 8%, and you need
cash and have to liquidate your investment. What will be your
selling price?
What will be your 1‐year holding period rate of return?

You bought a 10-year zero-coupon bond with a face value of
$1,000 and a yield to maturity of 2.7% (EAR). You keep the bond for
5 years before selling it. The price of the bond today is P 0 = F (
1 + r ) T = 1,000 1.027 10 = 766.12
If the yield to maturity is still 2.7% when you sell the bond at
the end of year-5, what is your personal ANNUAL rate of return?

Last year, you purchased a $1,000 par value bond with a 7%
annual coupon and a 20-year maturity. At the time of the purchase,
it had an expected YTM of 7.5%. After receiving the coupon, you
sold the bond today for $920. What is your return rate in one year?
(Hint: find out how much did you pay for the bond last year?)
Select one: a. 5.37% b. 9.18% c. 3.27% d. 4.32% e. 10.64%

Chapter 6 Spreadsheet
Problem
Bond
Valuation
Jenna bought a
bond that was issued by Sherlock Watson Industries (SWI) three
years ago. The bond has a $1,000 maturity value, a coupon rate
equal to 9 percent, and it matures in 17 years. Interest is paid
every six months; the next interest payment is scheduled for six
months from today.
a.
If the yield on similar risk investments is 12 percent, what is the
current market value (price) of the bond?...

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