You will receive $70 interest every six months from your investment in a corporate bond. The bond will mature in eightyears from now and has a face value of $1,000. This means that if you hold the bond until its maturity, you will continue to receive $70 interest semiannually and $1,000 face value at the end of eight years. a. What is the present value of the bond in the absence of inflation if the market interest rate is 9%? . The present value of the bond in the absence of inflation is $ 1289 (Round to the nearest dollar.) b. What would happen to the value of the bond if the inflation rate over the next eight years is expected to be %5? If the inflation rate over the next eight years is expected to be 5%, the present value of the bond will be $ 1700 (Round to the nearest dollar.)

You will receive $70 interest every six months from your investment in a corporate bond. The bond will mature in eightyears from now and has a face value of $1,000. This means that if you hold the bond until its maturity, you will continue to receive $70 interest semiannually and $1,000 face value at the end of eight years. a. What is the present value of the bond in the absence of inflation if the market interest rate is 9%? . The present value of the bond in the absence of inflation is $ 1289 (Round to the nearest dollar.) b. What would happen to the value of the bond if the inflation rate over the next eight years is expected to be %5? If the inflation rate over the next eight years is expected to be 5%, the present value of the bond will be $ 1700 (Round to the nearest dollar.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

See similar textbooks

Similar questions

Q4: Consider a bond paying a coupon rate of 10% per year semi-annually when the market interest rate is only 4% per half-year. The bond has three years until maturity. This initial payment is $1000. A: What is find the bond’s price today and 6 months time after the next coupon is paid?
Question 6 Assume that a bond makes 10 equal annual payments of \$1,000$1,000 starting one year from today. The bond will make an additional payment of \$100,000$100,000 at the end of the last year, year 10. (This security is sometimes referred to as a coupon bond.) If the discount rate is 3.5\%3.5% per annum, what is the current price of the bond?
3 A $1000 face value, 8% bond (interest payable semiannually) has 20 years remaining until maturity (at which time it will be redeemed at face value). The rate of return required by the market on this type of bond is 8% compounded semiannually. What is the market value of this bond today?
Investment in a Bond You invest in a 10-year $10,000 bond that pays interest at an annual rate 7% every 6 months for 10 years. The market rate (yield), i.e., what you will earn on the bond is 5%. Thus, you will receive the maturity value of $10,000 at the end of 10 years, and interest payments every 6 months of $350 (10,000 x 7% x 6/12). Requited: Calculate the issue price of the bond - the amount you will invest today to purchase this bond. Cash Flow Maturity Value Interest Payment Issue Price Required: Six Month Period N Amount Beginning Balance 10,000 350 Prepare an investment schedule for the first two months. Investment Schedule Present Value Factor Appropriate Interest Rate Interest earned Interest Received Present Value Ending balance
QUESTION 1 A Suppose you deposited the K 1000 in four payments of K250 each on 1st January of 2009, 2010, 2011 and 2012. How much would you have in your account on 1st January 2012 based on 8 percent annual compounding? B A government bond issued 5 years to maturity, a face value of K 1,000 and a coupon rate of 8% paid annually. Similar bonds have a yield of 8 percent. Suppose after one year the yield rises to 9% and interest is paid semi-annually, what would be the value of the bond Assume it is now 1st January 2008. On 1st January 2009, you will deposit K 1000 into a savings account that pays 8 percent If the bank compounds interest annually. How much will you have in your account on 1st January 2012 What would your 1st January 2012 balance be if the bank used quarterly compounding rather than annual compounding?
Question 7 You hold an annual coupon bond for 1 year, receiving the 0.14 coupon before selling. When bought it had 6 years to maturity, and the YTM was 0.095. Over the year, interest rates ROSE by 0.002What is the total holding period return for this investment? Group of answer choices 0.0939 0.0856 0.0903 0.0879 0.0820
Question 8 How much will the coupon payments be of a 10-year $1,000 bond with a 7% coupon rate and quarterly payments. $5.83 O $35 O $17.50 O $70.00
Suppose a $4,500 bond will pay you $325 at the end of each quarter until the face value of the bond ($4,500) is repaid at maturity. What is the fair market value of the bond if it matures in 6 years and the market rate of return is 6.1% compounded quarterly? $9,620.42 $11,090.01 $10,991.02 $9,719.40
Problem 2 (Required, 25 marks) We consider a 5-year straight term bond issued today. The bond pays coupon quarterly and the current annual effective yield rate is i = 7.1859%. You are also given that The current bond price is 2167.529. The clean price of the bond at the end of 15th month is 2130.929. Assuming that the yield rate remains unchanged over these 5 years, find the clean price of the bond at the end of 22nd month.
A bond has the following terms: Principal amount $1,000 Semi-annual interest $45 Maturity 15 years a. What is the bond's price if comparable debt yields 11%? b. What would be the price if comparable debt yields 11% and the bond matures after ten years? c. What would be the bond's price in a. and b. if interest rates declined to 8 % ?
Question 6. A two-year coupon bond has the following characteristics: Buying price: 18750 $ Face Value: 20000 S Annual interest rate: 5% Mode of payment: Quarterly What will be the final earning in acquiring such as a bond?
Question 1 Graystone bonds have a maturity value of RM100. The bonds carry a coupon rate of 10 percent. Interest is paid semi-annually. The bonds will mature in nine years. If the current market price is RM96.50, a.what is the yield to maturity on the bond? b.what is the current yield on the bond? Give typing answer with explanation and conclusion