If you buy it, you plan to hold it for 5 years. You (and the market) have expect

Question

If you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 8.5%. How much should you be willing to pay for Bond X today? You are considering a 10-year, $1,000 par value bond. Its coupon rate is 9%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 8.16%, how much should you be willing to pay for the bond? Last year Joan purchased a $1,000 face value corporate bond with an 11% annual coupon rate and a 10-year maturity. At the time of the purchase, it had an expected yield to maturity of 9.79%. If Joan sold the bond today for $1, 060.49, what rate of return would she have earned for the past year? Kaufman enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They

Explanation / Answer

7-16)

1 Face value (FV) $                                         1,000 2 Coupon rate 9.00% 3 Number of compounding periods per year 2 4 = 1*2/3 Interest per period (PMT) $                                         45.00 5 Number of years to maturity 10 6 = 3*5 Number of compounding periods till maturity (NPER) 20 7 Market rate of return/Required rate of return 8.16% 8 = 7/3 Market rate of return/Required rate of return per period (RATE) 4.08% Bond price PV(RATE,NPER,PMT,FV)*-1 Bond price $                                   1,056.68

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.