A portfolio of assets consists of the following as of January 1, 1997: 1) an annuity - immediate with 20 annual paymentsof 2,000 each, with the first payment on December 31, 2007 2) a 10,000 zero - coupon bond maturing on December31, 2001 at an annual effective interest rate of 8% Calculate the modified duration of the portfolio as of January 1, 1997.A) 10.67 B) 11.11 C) 11.53 D) 11.98 E) 12.41

Here's how to calculate the modified duration of the portfolio:1. Calculate the Modified Duration of…

Answered: A portfolio of assets consists of the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

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ABC Inc. plans to issue $500,000 face value bonds with a stated interest rate of 12% and market interest rate of 10%. They will mature in 10 years. Interest will be paid semiannually. At the date of issuance, compute the present value (bond issue price) of the future cash flows. Following are appropriate factors from tables: Table % / n Present Value of $1 Present Value of ordinary annuity of $1 10%/10 .38554 6.14457 12%/10 .32197 5.65022 5%/20 .37689 12.46221 6%/20 .31180 11.46992 Required Computation:
Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): The timeline starts at Period 0 and ends at Period 20. The timeline shows a cash flow of $ 20.72 each from Period 1 to Period 19. In Period 20, the cash flow is $ 20.72 plus $ 1,000. Period0121920 Cash Flows$20.72$20.72$20.72$20.72+$1,000 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value?
On May 1, 2020, a $300,000, ten-year, 14% bond was sold to yield 12% plus accrued interest. The bond was dated January 1, 2020, and interest is paid each January 1 and July 1. Present value data follow: PV of $1 PV of an Annuity of $1 10 periods 20 periods 10 periods 20 periods 6% 0.558395 0.311805 7.360087 11.469921 7% 0.508349 0.258419 7.023582 10.594014 12% 0.321973 0.103667 5.650223 7.469444 14% 0.321973 0.072762 5.216116 6.623131 Required: a. Compute the amount of cash received from the sale of the bond. b. Prepare the journal entry to record the sale. c. Why is the amount of cash received from issuing the bond not equal to the face amount of the bond?
David Palmer identified the following bonds for investment: BondA: A$1millionpar,10%annualcouponbond,whichwillmature on July 1, 2025. Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. (a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR), calculate the market price of Bond A on July 1, 2011. [N ote: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.] (b） David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016…
David Palmer identified the following bonds for investment: Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025. 2) 1) Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. Bond C: A S1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. 3) The three bonds were issued on July 1, 2011. (a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR) at issuance, calculate the market price of Bond A on July 1, 2011. [Note: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.] (b) David Palmer purchased Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on…
A 4,000, 8% bond with coupons payable quarterly on January 1, April 1, July 1, October 1 and will be redeemed on October 1, 1992. (Amortization of Premium) a. Find the purchase price of the bond on April 1, 1990 to yield 7% m=4. b. Construct a schedule of amortization of premium.
A 12% P1,000,000 face value bond with interest payable June 30 and December 31, which matures on June 30, 2026, was purchased at 95 for short term investment purposes on June 30, 2021. At the end of December 31, 2021, the bonds were quoted at 110. By June 30, 2022, all the bonds were sold at 115. How much would be the total cash that would be received by June 30, 2022? 1,000,000 1,100,000 O 1,150,000 O 1,210,000
Calculate, using effective annual rate of 5%, the convexity of the following assets. (i) 11-year zero coupon bond. (ii) A lump sum payment of $8500 in 5 years' time and a lump sum payment of $20000 in 20 years' time. (iii) An annuity immediate of $1 paid annually for 50 years
. A 25,000 4% bond with interest payable annually will mature on May 1, 1998. The date ofpurchase is July 1, 1988 to yield 3 ½% m=1. Find the purchase price of the bond on July 1,1988. (Bonds between dates)
Use the following tables to calculate the present value of a $315,000 @ 6%, 5-year bond that pays $18,900 interest annually, if the market rate of interest is 7%. Round to the nearest dollar. Present Value of $1 Present Value of Annuity of $1 Periods 5 % 6 % 7 % 10 % Periods 5 % 6 % 7 % 10 % 1. .95238 .94340 .93458 .90909 : 1 .95238 .94340 .93458 .90909 2 .90703 .89000 .87344 .82645 : 2 1.85941 1.83339 1.80802 1.73554 .86384 .83962 .81630 .75131 3 2.72325 2.67301 2.62432 2.48685 4 .82270 .79209 .76290 .68301 4 3.54595 3.46511 3.38721 3.16987 5 .78353 .74726 71299 .62092 5 4.32948 4.21236 4.10020 3.79079 .74622 .70496 .66634 .56447 5.07569 4.91732 4.76654 4.35526 7 .71068 .66506 .62275 .51316 5.78637 5.58238 5.38929 4.86842 8 .67684 .62741 .58201 .46651 8. 6.46321 6.20979 5.97130 5.33493 9. .64461 .59190 .54393 42410 7.10782 6.80169 6.51523 5.75902 10 ,61391 .55839 .50835 .38554 10 7.72173 7.36009 7.02358 6.14457
A $700,000, 20-year, 8% bond issue was sold to yield 10%. Interest was payable annually. Actuarial information for 20 periods follows: 8% 10% Future value of $1 4.66096 6.72750 Present value of $1 0.21455 .14864 Future value of an annuity of $1 45.76196 57.27500 Present value of an annuity of $1 9.81815 8.51356 Required:Compute the amount of cash that was received when the bonds were issued. When required, round your answer to the nearest dollar.$fill in the blank 1
A $10,000 bond with a coupon rate of 5% was redeemable on July 1, 2028. It was purchased on September 10, 2015 when the yield rate was 6% compounded semi- annually. Determine the purchase price of the bond. Paragraph IU ... Purchase Date: Redemption Date: 取 A

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