Question

You are considering a 25-year, $1,000 par value bond. Its coupon rate is 10%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 11.3280%, how much should you be willing to pay for the bond? Do not round intermediate calculations. Round your answer to the nearest cent.

Answer #1

Solution

First the nominal rate will be calculated

Effective annual rate=(1+Nominal rate/number of compounding periods in an year)^/number of compounding periods in an year-1

11.3280%=(1+Nominal rate/2)^2-1

Solving we get Nominal rate =11.0242%

Now the calculation for price of bond will be made

Price of bond=Present value of coupon payments+Present value of face value

Price of bond=Coupon payment*((1-(1/(1+r)^n))/r)+Face value/(1+r)^n

Face value =1000

n=number of periods to maturity=25*2=50

r-YTM-11.0242%/2=5.5121% semiannual

Semi annual Coupon payment=Coupon rate*face value/2=10%*1000/2=50

Putting values in formula

Price of bond=50*((1-(1/(1+.055121)^50))/.055121)+1000/(1+.055121)^50

Solving we get price of bond=913.45

**Thus amount willing to pay =$913.45**

**If you are satisfied with the answer,please give a
thumbs up**

You are considering a 10-year, $1,000 par value bond. Its coupon
rate is 10%, and interest is paid semiannually. If you require an
"effective" annual interest rate (not a nominal rate) of 9.1085%,
how much should you be willing to pay for the bond? Do not round
intermediate calculations. Round your answer to the nearest
cent.

You are considering a 30-year, $1,000 par value bond. Its coupon
rate is 10%, and interest is paid semiannually. If you require an
"effective" annual interest rate (not a nominal rate) of 7.3525%,
how much should you be willing to pay for the bond? Do not round
intermediate calculations. Round your answer to the nearest
cent.
$

You are considering a 20-year, $1,000 par value bond. Its coupon
rate is 8%, and interest is paid semiannually. If you require an
"effective" annual interest rate (not a nominal rate) of 10.8955%,
how much should you be willing to pay for the bond? Do not round
intermediate calculations. Round your answer to the nearest
cent.

You are considering a 15-year, $1,000 par value bond. Its coupon
rate is 10%, and interest is paid semiannually. If you require an
"effective" annual interest rate (not a nominal rate) of 7.03%, how
much should you be willing to pay for the bond? Do not round
intermediate steps. Round your answer to the nearest cent.

You are considering a 15-year, $1,000 par value bond. Its coupon
rate is 10%, and interest is paid semiannually. If you require an
"effective" annual interest rate (not a nominal rate) of 9.22%, how
much should you be willing to pay for the bond? Do not round
intermediate steps. Round your answer to the nearest cent.

You are considering a 20-year, $1,000 par value bond. Its coupon
rate is 8%, and interest is paid semiannually. If you require an
"effective" annual interest rate (not a nominal rate) of 11.14%,
how much should you be willing to pay for the bond? Do not round
intermediate steps. Round your answer to the nearest cent.

You are considering a 20-year, $1,000 par value bond. Its coupon
rate is 8%, and interest is paid semiannually.
Open spreadsheet If you require an "effective" annual interest
rate (not a nominal rate) of 10.86%, how much should you be willing
to pay for the bond? Do not round intermediate steps. Round your
answer to the nearest cent.

You are considering a 25-year, $1,000 par value bond. Its coupon
rate is 11%, and interest is paid semiannually. The data has been
collected in the Microsoft Excel Online file below. Open the
spreadsheet and perform the required analysis to answer the
question below.
If you require an "effective" annual interest rate (not a
nominal rate) of 9.87%, how much should you be willing to pay for
the bond? Do not round intermediate steps. Round your answer to the
nearest...

You are considering a 15-year, $1,000 par value bond. Its coupon
rate is 9%, and interest is paid semiannually. The data has been
collected in the Microsoft Excel Online file below. Open the
spreadsheet and perform the required analysis to answer the
question below.
Open spreadsheet
If you require an "effective" annual interest rate (not a
nominal rate) of 8.73%, how much should you be willing to pay for
the bond? Do not round intermediate steps. Round your answer to...

You are considering a 30-year, $1,000 par value bond. Its coupon
rate is 11%, and interest is paid semiannually. The data has been
collected in the Microsoft Excel Online file below. Open the
spreadsheet and perform the required analysis to answer the
question below.
If you require an "effective" annual interest rate (not a
nominal rate) of 7.27%, how much should you be willing to pay for
the bond? Do not round intermediate steps. Round your answer to the
nearest...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 6 minutes ago

asked 13 minutes ago

asked 21 minutes ago

asked 33 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 2 hours ago