A bond is sold for $1,054.88 currently. The bond has a coupon rate of 6%, paid s
ID: 2819998 • Letter: A
Question
A bond is sold for $1,054.88 currently. The bond has a coupon rate of 6%, paid semi-annually and it matures in 15 years. What is the yield-to-maturity of this bond? Round to the nearest hundredth percent. Do not include a percent sign in your answer. (i.e. If your answer is 4.32%, then type 4.32 without a % sign)
What is the yield to maturity of a bond if the bond is sold at $985.48 today, pays annual coupon of 7% and matures in 12 years? Round to the nearest hundredth percent. Do not include a percent sign in your answer. (i.e. If your answer is 4.32%, then type 4.32 without a % sign)
Yesterday, bonds for Cougar Cremary were traded for the yield-to-maturity of 7.28%, which were downgraded by S&P from A to BBB today. If everything else is constant from yesterday (expected inflation rate etc.):
a.) the bonds' yield-to-maturity should be higher than 7.28%.
b.) the bonds' coupon rate should be higher than 7.28%.
c.) the bonds' current yield should be higher than 7.28%.
d.) the bonds' price should increase.
e.) All of the above
f.) None of the above
Current interest rates are 10.58%. You want to buy a long-term bond with a face value of $1000 that pays a coupon rate of 10%. Which of the following prices is feasible?
a.) $873.56
b.) $904.27
c.) $987.56
d.) All of the above are feasible.
e.) None of the above are feasible.
f.) Not enough information to answer
a.) the bonds' yield-to-maturity should be higher than 7.28%.
b.) the bonds' coupon rate should be higher than 7.28%.
c.) the bonds' current yield should be higher than 7.28%.
d.) the bonds' price should increase.
e.) All of the above
f.) None of the above
Current interest rates are 10.58%. You want to buy a long-term bond with a face value of $1000 that pays a coupon rate of 10%. Which of the following prices is feasible?
a.) $873.56
b.) $904.27
c.) $987.56
d.) All of the above are feasible.
e.) None of the above are feasible.
f.) Not enough information to answer
Explanation / Answer
PV = -1054.88, FV = 1000, PMT = 30, N = 30
use rate function in Excel and multiply by 2
yield to maturity = 5.46%
b. PV = -985.48, FV = 1000, PMT = 70, N = 12
use rate function
yield to maturity = 7.18 %
c. a.) the bonds' yield-to-maturity should be higher than 7.28%.
d.
d.) All of the above are feasible.
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