Question

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.)

Answer #1

Face value = $41000

Coupon rate is 8%

Payable semiannually. So coupons in year = 2

Coupon payment = Face value*coupon rate*1/coupons in year

=41000*8%*1/2

=1640

Number of semiannual period in year (n) = 7*2

=14

Rate converitable quarterly = 8.5%

quarterly rate = 8.5%/4 =0.02125

Effective semiannual rate = ((1+quarterly rate)^number of quarters in semiannula period)-1

=((1+0.02125)^2)-1

=0.0429515625

so i = 0.0429515625

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

=(1640*(1-(1/(1+0.0429515625)^14))/0.0429515625) + (41000/(1+0.0429515625)^14)

=39746.26551

So purchase price of bond is $39746.27

A $7,000, 10% bond redeemable at par with semi-annual
coupons bought nine years before maturity to yield 9% compounded
semi-annually is sold four years before maturity at 93.625.
Find the gain or loss on the sale of the bond.
(Round the final answer to the nearest cent as needed. Round
all intermediate values to six decimal places as needed.)

A $51,000, 88% bond redeemable at 104 with semi-annual
coupons bought eleven years before maturity to yield 9% compounded
semi-annually is sold three years before maturity at 102.25. Find
the gain or loss on the sale of the bond.
(Round the final answer to the nearest cent as needed. Round
all intermediate values to six decimal places as needed.)

A $14,000 bond with a coupon rate of 8.50% is purchased 9 years
before maturity when the yield rate was 4.50% compounded
semi-annually. The bond coupons are paid every six months.
Calculate the purchase price of the bond.

Suppose that a 9% semi-annual coupon bond with a time to
maturity of 10 years and a par value of $100 has a price of $107,5.
This bond is first callable in 7 years at a redemption price of
$105,5. What is the yield to maturity for this bond? What is the
yield to first call for this bond?

Suppose that a 9% semi-annual coupon bond with a time to
maturity of 10 years and a par value of $100 has a price of $107,5.
This bond is first callable in 7 years at a redemption price of
$105,5.
What is the yield to maturity for this bond?
What is the yield to first call for this bond? You will need to
use Excel for this problem

A $50,000, 9.00% bond redeemable at par, with annual coupon
payments, is purchased 7 years before maturity to yield 6.00%
compounded annually.
a. What was the purchase price of the bond?
Round to the nearest cent
b. What was the amount of discount or premium
on the bond?

A $85,000 bond with a coupon rate of 7.00%, payable
semi-annually, is redeemable in 12.5 years. What was the purchase
price of the bond, when the yield rate was 5.00% compounded
semi-annually?
Round to the nearest cent

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
j2 = 9%
b)
$1,000
r = 9.25%
9
j2 = 7.5%
c)
$10,000
r = 8.5%
21
j2 = 10.25%
Quoted coupon rates and market rates are nominal annual rates...

A bond has a par value of $1,000, a time to maturity of 10
years, and a coupon rate of 8.60% with interest paid annually. If
the current market price is $860, what will be the approximate
capital gain of this bond over the next year if its yield to
maturity remains unchanged? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)

A GoodCredit company issued a bond with par value of $1,000.00,
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$870.00, what will be the approximate capital gain on this bond
over the next year if its yield to maturity remains unchanged?
NOTE: Capital gain is change in bond price.
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)

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