Question

Mr. Simpson buys a $1000 semi-annual coupon bond paying interest at 6.8%/year compounded semi-annually and redeemable at par in 12 years. Mr. Simpson's desired yield rate is 9.8%/year compounded semi-annually. How much did he pay for the bond?

Answer #1

Price paid for bond wil be present value of cash future Cash Flows that is coupon and face value at end.

face value = 1000

Years remaining to Maturity = 12

Semiannual periods (n)= (12*2) = 24

Coupon rate = 6.80%

Semiannual Coupon = 1000*6.8%/2 = 34

YTM = 9.80%

Semiannual yield (i) = 9.8%/2= 0.049

Bond price formula = Coupon amount * (1 - (1/(1+i)^n)/i + face
value/(1+i)^n

=34*(1-(1/(1+0.049)^24))/0.049 +
1000/(1+0.049)^24

=790.9919132

So he will pay $790.99 for the bond

Mr. Simpson buys a $1000 semi-annual coupon bond paying interest
at 11.3%/year compounded semi-annually and redeemable at par in 16
years. Mr. Simpson's desired yield rate is 14.3%/year compounded
semi-annually. After 9 years he sells the bond. Interest rates have
dropped and the bond is sold to yield a buyer 12.8%/year compounded
semi-annually. Determine the sale price.

A $1000 bond bearing interest at 8% payable semi-annually
redeemable at par on February 1, 2020, was purchased on October 12,
2013, to yield 7% compounded semi-annually. Determine the purchase
price.

A $1000 bond bearing interest at 8% payable semi-annually
redeemable at par on February 1, 2020, was purchased on October 12,
2013, to yield 7% compounded semi-annually. Determine the purchase
price.

Helen purchased a $1,500 bond that was paying a coupon rate of
5.20% compounded semi-annually and had 5 more years to mature. The
yield at the time of purchase was 6.70% compounded
semi-annually.
a. How much did Helen pay for the bond?
Round to the nearest cent
b. What was the amount of premium or discount
on the bond?
(click to select)PremiumDiscount
amount was
Round to the nearest cent

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.
a. How much did Lionel pay for the bond?
Round to the nearest cent
b. What was the amount of premium or discount
on the bond?
(click to select)Premium or Discount
amount was ____
Round to the nearest cent

A $4,500 bond pays interest at 7% compounded semi-annually. The
bond is redeemable in 1 year 6 months, and is purchased to yield
8%.
Find the purchase price of the bond.
Calculate the premium or discount.

Brady purchased a $25 000, 10.5 percent bond redeemable at par
with semi-annual coupon payments. He purchased the bond 10 years
before maturity to yield 12 percent compounded semi-annually. Six
years after purchasing the bond (four years before maturity), what
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changed?

A $15 000, 8% bond with semi-annual interest coupons redeemable at
par in seven years is bought to yield 7% compounded semi-annually.
Determine the amount of premium or discount.

A $85,000 bond with a coupon rate of 7.00%, payable
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Round to the nearest cent

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