Question

A five-year corporate bond with a face value of $10,000 pays interest at a coupon rate of 5.0%. The required return for investing in this bond is 4.0%. At what market price will the bond sell if the interest is paid semi-annually?

Answer #1

(a) Consider a 14-year, 9.5%
corporate bond with face value $10,000. Assume that the bond pays
semi-annual coupons. Compute the fair value of the bond today if
the nominal yield-to-maturity is 11% compounded semi-annually.
(b) Consider a 11-year,
corporate bond with face value $1,000 that pays semi-annual coupon.
With the nominal yield-to-maturity equal to 10%, the bond is
selling at $802.5550. Find the coupon rate for this bond. Assume
that the market is in equilibrium so that the fair value...

1.A Corporate bond has an 8.50 percent coupon and pays interest
annually. The face value is $1,000 and the current market price is
$940. The bond matures in 21 years. What is the yield to
maturity?
How much are you willing to pay for one share of stock if the
company just paid an $.80 annual dividend, the dividends increase
by 5.5 percent annually and you require a 9 percent rate of
return?

A corporate bond has
17 years to maturity, a face value of $1,000, a coupon rate of 5.3%
and pays interest semiannually. The annual market interest rate for
similar bonds is 3.2% and is quoted as a semi-annually compounded
simple interest rate, i.e 1.6% per 6-month period.
What is the price of
the bond?

A 3.375%, 10-year bond with semi-annual coupon payments and a
face value of $10,000 has just been sold at par.
What are the cash flows to the bond?
What is the (annual) required return on the bond?
If a 10-year zero-coupon bond were marketed at the same
required return as in part b), what would be the price of a $10,000
face value bond?
Immediately after issuance, if the required return increases by
0.50% per year, compounded semi-annually, what will...

A five-year bond has a face value of $1,000. Its coupon rate is
5% p.a. and coupons are paid semi-annually.
a. If the market yield at issuance is 5%, without calculation
identify the price of the bond would be?
b. If we hold the bond for 1.5 years and then sell it at a yield
of 4% p.a. What would the selling price be?
c. What would the holding period yield p.a. on this investment
be?

A Treasury bond has a face value of $10,000, a coupon of 8%, and
several years to maturity. Currently this bond sells for $9,260,
and the previous coupon has just been paid. What is the forward
price for delivery of this bond in 1 year? Assume that the interest
rates for 1 year out are flat at 9% semiannually compounded. The T
Bond pays coupons semi-annually. If the forward is trading in the
market for $9,500 what will you do?

Consider a 14-year, 9.5% corporate bond with face value $10,000.
Assume that the bond pays semi-annual coupons. Compute the fair
value of the bond today if the nominal yield-to-maturity is 11%
compounded semi-annually. Please show working

Q2: A corporate bond has 22 years to maturity, a face value of
$1,000, a coupon rate of 5.2% and pays interest semiannually. The
annual market interest rate for similar bonds is 3.3% and is quoted
as a semi-annually compounded simple interest rate, i.e 1.65% per
6-month period.
What is the price of the bond?

The five-year risk-free rate of interest is 3.8%. A five-year,
zero-coupon, $1,000 face value bond has a market price today of
$800.
a. What is the yield to maturity on the corporate bond?
(Careful: I am looking for the annualized rate and this is a five
year period.)
b. What is the yield spread between this corporate bond and the
risk free bond?
c. Can we estimate the beta risk of this corporate bond using
the CAPM equation? (Same answer...

What is the price of a 30-year, 7% coupon rate, $1,000 face
value bond that pays interest semi-annually, if the yield to
maturity on similar bonds is 6%?
a. $886.9
b. $940.7
c. $1,065.6
d. $1,138.4
e. $1,219.2

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