Hello, How do i solve this problem without using excel? A bond has a face value of $1000, a coupon rate of 7% with semi-annual payments, and 15 years to maturity. The yield to maturity of bonds of similar risk is 7%. What is the price you would pay for this bond?
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Hello,
How do i solve this problem without using excel?
A bond has a face value of $1000, a coupon rate of 7% with semi-annual payments, and 15 years to maturity. The yield to maturity of bonds of similar risk is 7%. What is the price you would pay for this bond?
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- Consider a bond with a face value of $2,000 that pays a coupon of $150 for 10 years. Suppose the bond is purchased at $500, and can be resold next year for $400. What is the rate of return of the bond? What is the yield to maturity of the bond?Solve each of the following questions using both pricing formulas and Excel. 2. A zero-coupon bond has a face value of $21,000 and a maturity of 8 years. Similar bonds have an interest rate of 5% per year. What is the price of this bond?Answer this question using the Par Value formula and showing all work. You have been given the following information for an existing bond that provides coupon payments. Par Value: $2000 Coupon rate: 6% Maturity: 4 years Required rate of return: 6%. What is the Present Value (PV) of the bond? If the required rate of return by investors were 11% instead of 6%, what would the Present Value of the bond be? Look at the same Par Value $2,000 Same Coupon rate: 6% Maturity: 10 years Required rate of return: 7% What is the Present Value of the Bond now? Explain how the longer maturities and higher required rate of return by investors affects the bond valuation.
- The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a.Suppose that today you buy a bond with an annual coupon rate of 6 percent for $1,150. The bond has 20 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b-1.Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b-2.What is the HPY on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Hello, How do I calculate this answer without using excel? What is the price you would be willing to pay for a zero coupon bond? Under these conditions: - The face value is $1000 - 10 years to maturity - yield to maturity of similar bonds (risk) is 8%?The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 7 percent for $1,160. The bond has 15 years to maturity. What rate of return do you expect to earn on your investment? Assume a par value of $1,000. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b- Two years from now, the YTM on your bond has declined by 1 percent, and you 1. decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b- What is the HPY on your investment? (Do not round intermediate calculations and 2. enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected rate of return b-1. Bond price b-2. HPY % I %
- You estimate that a 1-year zero-coupon bond (face value = $1000) has a probability of default equal to 26%. In the event of default, you estimate the bond issuer will bay $563. The current risk-free rate is 5%. How much should you pay for this bond?The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon rate of 10 percent for $1, 120. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment?Suppose you buy a bond with 3 years to maturity. The face value is 1000 and the coupon rate is 12 %. Assume after holding the bond for one year the market interest rate falls to 8 % a. What will be the new price of your bond? b. What will be the annual rate of return on your bond? c. Discuss the interest rate risk on bonds using your results in parts (a) and (b)?
- You just bought a newly issued bond which has a face value of $1,000 and pays its coupon once annually. Its coupon rate is 6%, maturity is 20 years and the yield to maturity for the bond is currently 8%. a. Do you expect the bond price to change in the future when the yield stays at 8%? Why or why not? Explain. (No calculation is necessary to answer this part of the question.) b. Calculate what the bond price would be in one year if its yield to maturity stays at 8%. c. Find the before-tax holding-period return for a one-year investment period if the bond sells at a yield to maturity of 7% by the end of the year (year 1). d. Suppose that the ordinary income tax rate is 40% and the capital gains tax rate is 30%. When the ordinary income tax rate is higher than the capital gains tax rate, tax authorities typically tax anticipated price appreciations from bonds at the higher ordinary income rate in order to prevent tax aversion with discount bonds. Suppose that from the total dollar…Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy an annual coupon bond with a coupon rate of 8.3 percent for $785. The bond has 8 years to maturity and a par value of $1,000. What rate of return do you expect to earn on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b-2. What is the HPY on your investment? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Rate of return b-1. Price b-2. Holding period…