Question

A bond with a $1,000 face value and a 15 percent annual coupon rate matures in 30 years.

a. Determine the value of the bond to a friend of yours with a required rate of return of 11%.

b. A zero coupon bond with similar risk is selling for $550. The bond has a face value of $1,000 and matures in 30 years. Your friend asks you which bond she should invest in, the zero coupon bond or the bond in part (a). Which bond do you recommend, and why? Assume the market price of the bond in part (a) is $1020.

Answer #1

**(a) Calculation of value of bond**

**(b) Calculation of value of zero coupon
bond**

It is recommended to **buy bond A (normal coupon
bond)** because it is selling cheaper in the market for
$1,020 as compared to its fair value price of $1,347.75, whereas
for zero coupoun bond it is vice-versa.

A
bond with a $1,000 face value and a 9 percent annual coupon pays
interest annually. The bond matures in 12 years.
A. Determine the value of the bond to a friend of yours with a
required rate of return of 11%?
B. A zero-coupon bond with similar risk is selling for $300.
The bond has a face value of $1,000 and matures in 12 years. Your
friend asks you which bond she should invest in, the zero coupon
bond...

A zero coupon bond has a face value of
$1,000
and matures in
6
years. Investors require a(n)
7.9%
annual return on these bonds. What should be the selling price
of the bond?

A bond with a $1,000 face value has a 5% annual coupon rate. The
bond matures in 18 years. The current YTM on the bond is 3.2%. If
you were to buy this bond and hold it for 6 years, how much would
the price change while you hold it? Assume the bond's YTM remains
the same. Answer in dollars and round to the nearest cent. [Hint:
1) If the price drops, the change is a negative number. 2) Compute...

A bond with a $1,000 face value has a 5% annual coupon rate. The
bond matures in 19 years. The current YTM on the bond is 3.1%. If
you were to buy this bond and hold it for 7 years, how much would
the price change while you hold it? Assume the bond's YTM remains
the same. Answer in dollars and round to the nearest cent. [Hint:
1) If the price drops, the change is a negative number. 2) Compute...

A bond with a $1,000 face value has a 5% annual coupon rate. The
bond matures in 18 years. The current YTM on the bond is 3.2%. If
you were to buy this bond and hold it for 6 years, how much would
the price change while you hold it? Assume the bond's YTM remains
the same. Answer in dollars and round to the nearest cent. [Hint:
1) If the price drops, the change is a negative number. 2) Compute...

A bond with a face value of $ 1,000 and a quarterly coupon of
14%, matures in 10 years. If your required rate of return is 12%,
how much would you be willing to pay for the bonus today?

PGP Co. expects to issue a $1,000 face-value bond that matures
in 8 years. The annual coupon rate is 9%, and interest payments are
expected to be paid semiannually. Similar bonds are currently
priced at 101.4% of face value. Given this information, what is the
required return by bondholders?
4.38%
8.75%
4.56%
8.49%
9.12%

A $1,000 face value
bond currently has a discount rate (yield-to-maturity) of 6.69
percent. The bond matures in three years and pays coupon annually.
The coupon rate is 7 percent. What type of bond it is?
Group of answer choices
Premium bond
Discount bond
Par bond
Zero-coupon bond

A Japanese government bond with a $1,000 face value has a 1.96%
annual coupon rate. The bond matures in 7 years. The current YTM on
the bond is -0.5% (negative!). What is this bond worth? Round to
the nearest cent.

An Australian Government bond with a face value of $1,000 and an
annual coupon rate of 5.5% matures in seven years, pays interest
semi-annually, and has a yield to maturity of 6.2%. What is the
price of the bond right after it makes its first coupon
payment?
a. $947.21
b. $960.73
c. $945.08
d. $963.01

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