Easy Problems 1-6
5-1Bond Valuation with Annual payments
Jackson piles sticks hold in 12 years remaining to due date. touch is paid annually, the ties have a $1,000 par value, and the coupon evoke rate is 8%. The bonds have a slacken off to due date of 9%. What is the current market price of these bonds?
80*7.1607+ m*.3555 = $928
5-2Yield to Maturity for Annual payments
Wilson Wonderss bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds swap at a price of $850. What is their yield to maturity?
c+1000-850/12/1000+850/2 = 112.5/925 = .1216 or 12.16%
5-6Maturity essay Premium
The real risk-free rate is 3%, and inflation is judge to be 3% for the next 2 years. A 2-year treasury security yields 6.3%. What is the maturity risk premium for the 2-year security?
6.3-3-3 = 0.3%
intermediate Problems 7-20
5-7Bond Valuation with Semiannual payments
Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?
50*11.44+1000*.
5138 = 1086
5-13Yield to Maturity and present-day(prenominal) Yield
You just purchased a bond that matures in 5 years. The bond has a face value of $1,000 and has an 8% annual coupon. The bond has a current yield of 8.21%. What is the bonds yield to maturity?
Current price = 80/.0821 = 974
YTM = 80+1000-974/5/1000+974/2 = 85.2/987 = .0863 or 8.63%
(Brigham, Eugene F. . Financial Management: system & Practice, 13th Edition. South Western Educational Publishing, 03/2010. pp. 210 - 211).
Questions
(6-6)If a partys beta were to double, would its expected return double?
It is non necessary, for example if the risk free rate of return is 4% and market risk premium is 6% and...If you want to pretend a full essay, order it on our website: Orderessay
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