Investor Matt has $335,000 to invest in bonds. Bond A yields an average of 7.5% and the bond B yields 7.0%. Matt requires that at least 4 times as much money be invested in bond A as in bond B- You must invest in these bonds to maximize his return. What is the maximum return? per year. Round to the nearest cent.

Investor Matt has $335,000 to invest in bonds. Bond A yields an average of 7.5% and the bond B yields 7.0%. Matt requires that at least 4 times as much money be invested in bond A as in bond B- You must invest in these bonds to maximize his return. What is the maximum return? per year. Round to the nearest cent.

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

See similar textbooks

Similar questions

Give typing answer with explanation and conclusion 1. Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal payment at maturity. What is the $1,000 called? A. coupon B. face value C. discount D. yield E. dirty price
K An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield on AAA bonds is 4%, on A bonds 5%, and on B bonds 8%. The client wants to invest twice as much in AAA bonds as in B bonds. How much should be invested in each type of bond if the total investment is $19,000, and the investor wants an annual return of $990 on the three investments? The client should invest $ in AAA bonds, $ in A bonds, and $ in B bonds.
Investor Matt has $698,000 to invest in bonds. Bond A yields an average of 5.8% and the bond B yields 7.3%. Matt requires that at least 4 times as much money be invested in bond A as in bond B. You must invest in these bonds to maximize his return. What is the maximum return? $ per year. Round to the nearest cent. appreciate the help thx! ))
Dog Suppose you purchase a 10-year bond with 6.6% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.4% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment?
3. You own several bonds and as an astute investor, you keep track of your interest payments (also known as coupon payments or cash flows). Annually, you receive a fixed total of interest payments of $2,000 per year from these bonds for the next 5 years and your required rate of return is 7.5%. What is the current value of your bond investment? Show your work and explain your answer.
Using the financial calculator BA II Plus what are the inputs to use to solve for would you buy a 1,000 FV bond selling for 700 10 yrs to maturity Pays a 5% coupon rate Annual required rate of return is 10% Bond pays coupon semi-annually
Consider a bond that promises the following cash flows. The required discount rate is 15%. Year 0 1 2 3 4 Promised Payments 160 170 180 230 You plan to buy this bond, hold it for 3 years, and then sell the bond. What total cash will you receive from the bond after the 3 years? Assume that periodic cash flows are reinvested at 15%
Yo WS lio cen Kenneth Clark just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Pharoah Corp. that pays an annual coupon rate of 5.5 percent. If the current market rate is 7.00 percent, what is the maximum amount Kenneth should be willing to pay for this bond? (Round answer to 2 decimal places, e.g. 15.25.) Kenneth should pay $
#3 Imagine that a local water company issued a $10,000 ten-year bond at an interest rate of 6%. You are thinking about buying this bond one year before the end of the ten years, but interest rates are now 9%. a. Given the change in interest rates, would you expect to pay more or less than $10,000 for the bond? b. Calculate what you would actually be willing to pay for this bond.
Question 5 Suppose that discount bond prices are as follows: see picture a. A customer of your bank wants a forward contract to borrow $20M in three years from now for one year. What would be your quote to the customer? b. How would you confirm the rate? c. If customer accepts your offer, how would you lock-in the cash flows. Is there an arbitrage opportunity available? Show the entire cashflows chart.
#2 A couple purchased a bond for $950.00 three years ago. The bond pays 7.625% APR with semi-annual coupons with a face value of $1,000. Currently, the bond has exactly 10 years until maturity, and investors seek a return of 12.00% APR on bonds of similar risk. What is the current price of the bond? Submit Answer format: Currency: Round to: 2 decimal places. Hide Hint A couple purchased a bond for $950.00 three years ago. The bond pays 6% APR with semi-annual coupons with a face value of $1,000. Currently, the bond has exactly 10 years until maturity, and investors seek a return of 9% APR on bonds of similar risk. What is the current price of the bond? SOLUTION: Bond Price = PV of Bond Cash Flows Po= = CPN y' -x1- + 1+ Face Value (1+ y')N' APR%x Face Value 6%x$1,000 Coupon CPN = = = $30 per 6 months m 2 y' = y = m 9% 2 = 4.50% per 6 months N' = = Nxm = 10x2 = 20 coupons remaining Po $30 0.045 x(1-(1,045)20) + $1,000 (1.045) 20 = $804.88 KEY POINT: For pricing the bond today, the price…
a. Assuming you purchased the bond for $350 what rate of return would you earn if you held the bond for 25 years until it matured with a value $1000? a. Rate of return____% b. Suppose under the terms of thebond you could redeem the bond in 2024. DMF agreed to pay an annual interest rate of 1.4 percent until the date. How much would the bond be worth at that time? b. Bond value_____ c. In 2024 instead of cashing in the bond for its then current value you decide to hold the bond until it mature in 2043. What annual rate of return will you earn over the last 19 years? c. Rate of return___%

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS