Question

a) An investor has a cash of Tshs10,000,000 at disposal. He wants to invest in a...

a) An investor has a cash of Tshs10,000,000 at disposal. He wants to invest in a bond with Tshs1,000 nominal value and whose dirty price is equal to 107.457%. What is the number of bonds he will buy? b) An investor wants to buy a bullet bond of the automotive sector. He has two choices: either invest in a US corporate bond denominated in euros or in a French corporate bond with same maturity and coupon. Are the two bonds comparable?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Part a:

The dirty price is 107.457% and the nominal value is Tshs1000. So the price of each bond shall be Tshs1000x107.457%= Tshs1074.57.

So the number of bonds the investor can buy with cash of Tshs10,000,000=10,000,000/1074.57= 9306 number of bonds.

Part b:

US corporate bond denominated in euros is a type of Eurobond and the French corporate bond is a type of traditional bond but both the bonds are in the same currency and have the same maturity and coupon. So the two bonds are comparable.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A French investor recently purchased €20.5 million worth of US dollar denominated corporate bonds with 1...
A French investor recently purchased €20.5 million worth of US dollar denominated corporate bonds with 1 year until maturity that pay 5.5% percent interest annually. The current spot price of Euros for US dollars is €0.9/$1. a) Is the French investor to an appreciation or depreciation of the euro relative to the dollar? b) What will be the return on the bond (if held to maturity) if the euro depreciates relative to the dollar such that the spot rate of...
Gustavo Fring, a seasoned businessman, has a lot of liquidity (cash) at his disposal. Accordingly, he...
Gustavo Fring, a seasoned businessman, has a lot of liquidity (cash) at his disposal. Accordingly, he decides to invest some of his earnings in a fixed income security. He has two Bonds to choose from. Each has a maturity of 5 years, a par value of $500, and a yield to maturity of 15%. Bond A has a coupon interest rate of 5% paid annually. Bond B has a coupon interest rate of 10% paid annually. a. Calculate the price...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 5 ​years, a par value of ​$1,000​, and a yield to maturity of 8.70 %   The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.319​% paid annually. The second ​ bond, issued by Malfoy​ Enterprises, has a coupon interest rate of 8.80​% paid annually.  Calculate the selling price for each of the bonds.906.66 and 1,003.92  Mark...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 5 ​years, a par value of ​$1,000​, and a yield to maturity of 8.70 %   The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.319​% paid annually. The second ​ bond, issued by Malfoy​ Enterprises, has a coupon interest rate of 8.80​% paid annually.  Calculate the selling price for each of the bonds.906.66 and 1,003.92  Mark...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 5 ​years, a par value of ​$1,000​, and a yield to maturity of 8.70 %   The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.319​% paid annually. The second ​ bond, issued by Malfoy​ Enterprises, has a coupon interest rate of 8.80​% paid annually.  Calculate the selling price for each of the bonds.906.66 and 1,003.92  Mark...
George is a US investor who wants to invest in French stock markets. Consider the following...
George is a US investor who wants to invest in French stock markets. Consider the following facts about France: Over the course of the next 180 days, there is a 40% chance that the Euro will lose 20% of its value relative to the US dollar and the French stock market will remain unchanged, and there is a 60% chance that the Euro will appreciate by 10% of its value relative to the US dollar and the French stock market...
George is a US investor who wants to invest in French stock markets. Consider the following...
George is a US investor who wants to invest in French stock markets. Consider the following facts about France: Over the course of the next 180 days, there is a 40% chance that the Euro will lose 20% of its value relative to the US dollar and the French stock market will remain unchanged, and there is a 60% chance that the Euro will appreciate by 10% of its value relative to the US dollar and the French stock market...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity...
Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 5 ​years, a par value of ​$1,000​, and a yield to maturity of 8.70 %   The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.319​% paid annually. The second ​ bond, issued by Malfoy​ Enterprises, has a coupon interest rate of 8.80​% paid annually.  Calculate the selling price for each of the bonds.906.66 and 1,003.92  Mark...
An investor has a budget of $35 million. He can invest in the projects shown below...
An investor has a budget of $35 million. He can invest in the projects shown below or buy corporate bonds and earn 6%.  If the cost of capital is 8%, and all investments, including the corporate bonds, are of equal risk, what investment or investments should he make?                                                     Initial Investment                        Cash flow                         Project A              $35 million             $14 million per year for four years                         Project B              $21 million             $10.5 million per year for three years                                    Project C              $14 million             $7 million per year for four years                               Project D              $21 million             $7...
Bond valuation and yield to maturity Personal Finance Problem    Mark​ Goldsmith's broker has shown him two...
Bond valuation and yield to maturity Personal Finance Problem    Mark​ Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 6 ​years, a par value of ​$1,000​, and a yield to maturity of 8.80 %. The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.316​% paid annually. The second ​ bond, issued by Malfoy​ Enterprises, has a coupon interest rate of 8.90​% paid annually. a.  Calculate the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT