Miller Corporation has a premium bond making semiannual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and 15 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 15 years to maturity. Both bonds have a par value of $1,000. a. What is the price of each bond today? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price today b. Price in 1 year Price in 6 years Price in 10 years Price in 14 years Price in 15 years Miller Bond Modigliani Bond

Miller Corporation has a premium bond making semiannual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and 15 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 15 years to maturity. Both bonds have a par value of $1,000. a. What is the price of each bond today? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price today b. Price in 1 year Price in 6 years Price in 10 years Price in 14 years Price in 15 years Miller Bond Modigliani Bond

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 8 percent, has a YTM of 6 percent, and has 18 years to maturity. Bond Y 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 18 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Price of Bond X $ Price of Bond Y $ If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In eight years? In 13 years? In 17 years? In 18 years? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Price of bond Bond X Bond Y One year $ $ Eight years $ $ 13 years $ $ 17 years $ $ 18 years $ $
Miller Corporation has a premium bond making semiannual payments. The bond paysa 9 percent coupon, has a YTM of 7 percent, and has 13 years to maturity. TheModigliani Company has a discount bond making semiannual payments. This bondpays a 7 percent coupon, has a YTM of 9 percent, and also has 13 years to maturity.If interest rates remain unchanged, what do you expect the price of these bonds to be
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7 percent, has a YTM of 5 percent, and has 17 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 5 percent, has a YTM of 7 percent, and also has 17 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In seven years? In 12 years? In 16 years? In 17 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7 percent, has a YTM of 5 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 5 percent, has a YTM of 7 percent, and also has 13 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In four years? In nine years? In 11 years? In 13 years?
Bond A is a premium bond making semiannual payments. The bond has a coupon rate of 7.5%, a YTM of 6%, and 13 years to maturity. Bond B is a discount bond making semiannual payments. This bond has a coupon rate of 6%, a YTM of 7.5%, and also 13 years to maturity. What are the prices of these bonds today assuming both bonds have a $ 1000 par value? If interest rates remain unchanged, what do you expect the prices of these bonds to be in 2 years and in 12 years?
Kawesha Corporation has a premium bond making semiannual payments. The bondpays a 9 percent coupon, has a YTM of 7 percent, and has 13 years to maturity. TheModigliani Company has a discount bond making semiannual payments. This bondpays a 7 percent coupon, has a YTM of 9 percent, and also has 13 years to maturity.If interest rates remain unchanged, what do you expect the price of these bonds to be(a) 1 year from now?(b) In 3 years? (c) In 8 years?(d) In 12 years?(e) What’s going on here?
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9 percent, a YTM of 7 percent, and 15 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7 percent, a YTM of 9 percent, and also has 15 years to maturity. Both bonds have a par value of $1,000. a. What is the price of each bond today? b. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? Note: For all requirements, do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. a. Price today b. Price in 1 year Price in 6 years Price in 10 years Price in 14 years Price in 15 years Bond X Bond Y
Bond X is a premium bond making semiannual payments. The bond pays a coupon rate of 7 percent, has a YTM of 5 percent, and has 19 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a coupon rate of 5 percent, has a YTM of 7 percent, and also has 19 years to maturity. The bonds have a $1,000 par value. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In 11 years? In 14 years? In 16 years? In 19 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
The Salem Company bond currently sells for $848.55, has a coupon interest rate of 14%and a $1000 par value, pays interest annually, and has 16 years to maturity. a. Calculate the yield to maturity (YTM) on this bond. b. Explain the relationship that exists between the coupon interest rate and yield to maturity and the par value and market value of a bond.
Bond A makes semiannual payments and is currently trading at par. The bond pays a coupon rate of 8.6 percent and has 5 years to maturity. Bond B also makes semiannual payments and is currently trading at par. The bond pays a coupon rate of 8.6 percent and has 15 years to maturity. Calculate the price of both bonds if interest rates fall by 2% and increase by 2% (so that you have 3 different prices for each bond, including the current price at par). Which bond is more sensitive to changes in interest rates? Comment on why.
Crossfade Corporation has a bond with a par value of $2,000 that sells for $1,925.24. The bond has a coupon rate of 6.51 percent and matures in 13 years. If the bond makes semiannual coupon payments, what is the YTM of the bond?
A. Table below is information about three USD10000 par value bonds, each of which pays coupon semiannually. The required rate of return on each bond is 14%. Calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value. Bond Coupon Rate (%) Maturity (years) 1 8 5 2 14 10 3 16 15 B. Using the Interpolation Method to calculate the YTM for the below Bonds: > The par value USD18000 > Coupon Rate 10% every year > Maturity period 10 years > Market Value of bond USD21800

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