Question

1. Assume Par value of $1,000 and semiannual coupon payments for all: A bond has a...

1. Assume Par value of $1,000 and semiannual coupon payments for all:

A bond has a coupon rate of 8.6% and 11 years until maturity. If the yield to maturity is 7.6%...

a) is the bond selling at a discount, premium or at face value?

b) what is the price of the bond?

c) if market rates rose (such that bonds of equal credit risk were now paying 8% (new YTM = 8%), would that make the price of the bond go up or down versus your answer above? Calculate new price.

d) if the bond had a call provision, which party generally benefits: bond issuers (corporations & gov’t entities) or bondholders?

Homework Answers

Answer #1

Part A:

As coupon rate > YTM, Bond will be selling at Premium ( > Face Value)

Part B:

Price of a bond = PV of Cashflows from it.

Part C: if Int rate increases, Bond price will decrease ( Inverse relation etween YTM & Bond Price)

New Bond Price:

Part D:

Callable Bond, The issuer of Bond can call at any time before its maturity period.

Generally Issuer will call for, where the conditions are favourable to him.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Miller Corporation has a premium bond making semiannual payments. The bond pays a coupon of 6.5...
Miller Corporation has a premium bond making semiannual payments. The bond pays a coupon of 6.5 percent, has a YTM of 5.3 percent, and has 13 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond pays a coupon of 5.3 percent, has a YTM of 6.5 percent, and also has 13 years to maturity. Both bonds have a par value of $1,000. If interest rates remain unchanged, what do you expect the price of...
1. Assume a bond has a face value of $1,000, coupon rate of 7%, maturity of...
1. Assume a bond has a face value of $1,000, coupon rate of 7%, maturity of 9 years, and can currently be purchased in the market at a price of $1,099. The bond can be called after 5 years, and in that case the call premium paid would be $50. Which is bigger, YTM or YTC? Use two decimals in your calculations for your comparison. a.YTM b.YTC c.They are both the same. d.There is not enough information to calculate YTM....
A 25-year maturity bond with par value $1,000 makes semiannual coupon payments at a coupon rate...
A 25-year maturity bond with par value $1,000 makes semiannual coupon payments at a coupon rate of 8%. a. Find the bond equivalent and effective annual yield to maturity of the bond if the bond price is $950. (Round your intermediate calculations to 4 decimal places. Round your answers to 2 decimal places.) Bond equivalent yield to maturity % Effective annual yield to maturity %
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of...
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7.4 percent, has a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 6.8 percent, has a YTM of 7.4 percent, and has 13 years to maturity. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of...
A bond with a par value of $1,000 and a coupon rate of 8% (semiannual coupon)...
A bond with a par value of $1,000 and a coupon rate of 8% (semiannual coupon) has a current yield of 7%. What is its yield to maturity? The bond has 8 years to maturity.
Bond P is a premium bond making semiannual payments. The bond pays a coupon rate of...
Bond P is a premium bond making semiannual payments. The bond pays a coupon rate of 8 percent, has a YTM of 6 percent, and has 12 years to maturity. Bond D is a discount bond making semiannual payments. This bond pays a coupon rate of 6 percent, has a YTM of 8 percent, and also has 12 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? If interest rates remain...
Suppose a​ seven-year, $1,000 bond with a 7.6% coupon rate and semiannual coupons is trading with...
Suppose a​ seven-year, $1,000 bond with a 7.6% coupon rate and semiannual coupons is trading with a yield to maturity of 6.54%. a. Is this bond currently trading at a​ discount, at​ par, or at a​ premium? Explain. b. If the yield to maturity of the bond rises to 7.33% (APR with semiannual​ compounding), what price will the bond trade​ for? a. Is this bond currently trading at a​ discount, at​ par, or at a​ premium? Explain.  ​(Select the best...
- Nesmith Corporation's outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 9 years...
- Nesmith Corporation's outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 9 years to maturity, and a 10% YTM. What is the bond's price? - A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,054.06, and currently sell at a price of $1,105.17. What are their nominal yield to maturity and their nominal yield to call?
starbucks has a 8.8% coupon 10 year bond (par value = 1,000). assume that coupon payments...
starbucks has a 8.8% coupon 10 year bond (par value = 1,000). assume that coupon payments are semiannual and that the yield-to-maturity is 8.2%. what is the price of this bond?
Bond Price Movements. Bond X is a premium bond making semiannual payments. The bond has a...
Bond Price Movements. Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.5 percent, a YTM of 7 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7 percent, a YTM of 8.5 percent, and also has 13 years to maturity. What are the prices of these bonds today assuming both bonds have a $1,000 par value? If interest...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT