Question

Calculate the purchase price of the following bonds. Indicate whether the bonds are priced at a discount, at par or at a premium. Give your answers in dollars and cents to the nearest cent.

Face Value | Coupon Rate | Years to Maturity | Market Rate | |
---|---|---|---|---|

a) | $100 | r = 9% | 5 | j_{2} = 9% |

b) | $1,000 | r = 9.25% | 9 | j_{2} = 7.5% |

c) | $10,000 | r = 8.5% | 21 | j_{2} = 10.25% |

Quoted coupon rates and market rates are nominal annual rates compounded semi-annually.

a)Price = $

This bond is priced at:

a discount

par

a premium

b)Price = $

This bond is priced at:

a discount

par

a premium

c)Price = $

This bond is priced at:

a discount

par

a premium

Answer #1

(a) Price of a bond= PV of future cash flows discounted at required rate of return

= coupon* annuity factor (9%,5 yrs) + face value* disc. factor(9%,5th yr)

= 9*3.890 + 100*0.650

= 100 (approx)

The bond is trading at par (evident because coupon rate= required return, i.e, market rate)

(b)

Price of a bond= PV of future cash flows discounted at required rate of return

= coupon* annuity factor (7.5%,9 yrs) + face value* disc. factor(7.5%,9th yr)

= 92.5*6.3789 + 1000*0.521

= 590.05 + 521

= 1111.05

Bond is trading at premium (since coupon rate> market rate)

(c)

Price of a bond= PV of future cash flows discounted at required rate of return

= coupon* annuity factor (10.25%,21 yrs) + face value* disc. factor(10.25%,21st yr)

= 7224.26 + 1288

= $ 8512.26

Bond is trading at discount (since coupon rate< market rate)

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What is the price of a 11-year bond paying 5 % annual coupons
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A firm issues a 20-year semi-annual payment bond,
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The tax rate is 38 percent. What is the after-tax cost of debt?

Lionel purchased a $5,000 bond that was paying a coupon rate of
4.40% compounded semi-annually and had 8 more years to mature. The
yield at the time of purchase was 5.80% compounded
semi-annually.
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Round to the nearest cent
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on the bond?
(click to select)Premium or Discount
amount was ____
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K Corporation Inc.'s bonds mature in 13 years, that were issued
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and why?

a
20 year, 8% coupon rate, $1,000 par bond that pays interest
semi-annually bought five years ago for $850. this bond is
currently sold for 950. what is the yield on this bond?
a.12.23%
b.11.75%
c.12.13%
d.11.23%
an increase in interest rates will lead to an increase in the
value of outstanding bonds.
a. true
b. false
a bond will sell ____ when coupon rate is less than yield to
maturity, ______ when coupon rate exceeds yield to maturity, and...

1) Which of the following statements is
correct?
a) If a bond is at a discount, the coupon rate is less than the
current yield, which is less than YTM.
b) Current yield is the ratio of annual coupon payment divided
by the par value.
c) When the coupon rate is higher than the market rate, the bond
is priced at a discount.
d) When the market rate is higher than the coupon rate, the bond
is priced at a...

Determine the purchase price at the indicated time before the
maturity of the following
bond redeemed at par shown in the table below.
Par-Value
Bond Rate Payable Semi-Annually
Time Before Redemption
Yield Rate
Conversion Period
$ 41,000
8%
7
years
8.5%
quarterly
The purchase price of the bond is $__.
(Round the final answer to the nearest cent as needed. Round
all intermediate values to six decimal places as needed.)

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15 years remaining to maturity. Interest is paid
semi-annually, they have a $1,000 par value, the
coupon interest rate is 9%, and the yield to maturity is 8%. What
is the bond’s current market price?
BOND VALUATION Nungesser Corporation’s
outstanding bonds have a $1,000 par value, a 9% semiannual coupon,
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A bond has a coupon rate of 4.6% and pays coupons semi-annually.
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What is the coupon rate for the bond? Assume semi-annual
payments. Answer as a percent!
Bond
Coupon Rate
Yield
Price Quote
t
Apple B
?
3.7%
99.09
21

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