Question

Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require a 10.7% nominal yield to maturity (YTM) on this investment, what is the maximum price you should be willing to pay for the bond?

Please show how this problem can be solved without a financial calculator.

Answer #1

price of the bond = (present value of annuity factor * interest payment) + (present value factor * face value)

here,

present value of annuity factor = [1-(1+r)^(-n)]/r

here,

r= 10.7% per annum =>5.35% for 6 months ..........(since we have semi annual payments).

n = 20 years. * 2 semi annual periods

=>40.

now,

present value of annuity factor = [1-(1.0535)^(-40)]/0.0535

=>16.367436.

interest payment = $1,000*9.5%*6/12

=>$47.50.

present value factor = 1/ (1+r)^n

=>1/ (1.0535)^40

=>0.12434216.

face value =$1,000.

now

value of the bond = [16.367436*$47.50] + [0.12434216*$1,000]

=>$901.80.

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual
interest payments. If you require a 10.7% nominal yield to maturity
(YTM) on this investment, what is the maximum price you should be
willing to pay for the bond?
(Please show work and explain formula of how you got this answer
NOT on excel)

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 10.7% nominal yield to maturity on this investment,
what is the maximum price you should be willing to pay for the
bond?
a.
$874.74
b.
$721.44
c.
$1,000.99
d.
$901.80
e.
$910.81

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 12.7% nominal yield to maturity on this investment,
what is the maximum price you should be willing to pay for the
bond?
a.
$901.80
b.
$674.76
c.
$1243.46
d.
$833.43
e.
$769.5

Assume that you are considering the purchase of a 20-year,
noncallable bond with an annual coupon rate of 9.5%. The bond has a
face value of $1,000, and it makes semi-annual interest payments.
If you require a yearly 7.4% nominal yield to maturity on this
investment, what is the maximum price you should be willing to pay
for the bond?
Group of answer choices
$1,262.11
$1,217.43
$1,126.76
$1,161.67

Assume that you are considering the purchase of a 10-year,
noncallable bond with an annual coupon rate of 5%. The bond has a
face value of $1,000, and it makes semiannual interest payments. If
you require an 6% yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond?
Provide the correct excel function along with
inputs

Assume that you are considering the purchase of a 14-year,
noncallable bond with an annual coupon rate of 7.70%. The bond has
a face value of $1000, and it makes semiannual interest payments.
If you require an 11.00% yield to maturity on this investment, what
is the maximum price you should be willing to pay for the bond?

Assume that you are considering the purchase of a 15-year bond
with an annual coupon rate of 9.5%. The bond has face value of
$1,000 and makes semiannual interest payments. If you require a 8%
nominal yield to maturity on this investment, what is the maximum
price you should be willing to pay for the bond?
Group of answer choices
925.28
961.57
1083.90
1,129.69
1040.72

Assume that you are considering the purchase of a 7-year bond
with an annual coupon rate of 4.5%. The bond has face value of
$1,000 and makes semiannual interest payments. If you require an
12.0% nominal yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond?

assume that you were considering the purchase of a 20 year
non-callable bond with an annual coupon rate of 9.5% the bond has a
face value of $1000 and it makes semi annual interest payments. if
you require a 9.5% nominal yield to maturity on this investment
what is the maximum price you should be willing to pay for the
bond?

Assume that you wish to purchase a 20-year bond that has a
maturity value of $1,000 and makes semiannual interest payments of
$46. If you require a 10 percent nominal yield to maturity on this
investment, what is the maximum price you should be willing to pay
for the bond?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 9 minutes ago

asked 17 minutes ago

asked 37 minutes ago

asked 48 minutes ago

asked 53 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago