Pricing bonds at a discount-actual return

Assignment Help Financial Management
Reference no: EM132068870

PRICING BONDS AT A DISCOUNT -

(a) Calculate the price of a 3 percent coupon (annual coupons), $1,000 face value, 3-year bond if the appropriate discount rate is 5 percent. Show your return if you hold this bond for one year and its discount rate doesn't change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL).

ACTUAL RETURN -

(b) What actual return did you earn if you bought a bond for $1,000, sold it a year later for $950, and received a $50 annual coupon the day before you sold it? (INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL).

PRICING BONDS AT A PREMIUM -

(c) Calculate the price of a 10 percent coupon (annual coupons), $1,000 face value 20-year bond if the appropriate discount rate is 3 percent. Show your return if you hold this bond for three years and discount rates don't change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL).

PRICING BONDS WITH SEMI-ANNUAL COUPON PAYMENTS -

(d) Calculate the price of a 4 percent coupon (annual coupons), $100 face value, 2-year bond if the coupon is paid semi-annually and the six-month discount rate is 3 percent. Calculate your actual return if you hold this bond for one year and the discount rate does not change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL).

Reference no: EM132068870

Questions Cloud

What are incremental earnings associated with new machine : what are the incremental earnings (net income) associated with the new machine?
Incremental free cash flows associated with the new machine : You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine?
Costs incurred as percentage of total estimated costs : Assume that the company estimates percentage complete based on costs incurred as a percentage of total estimated costs.
What is walden cost of goods sold : During 2014, Accent sold 23,000 unites at price of 35 euros per unit. Under the first in, first out (FIFO) method, what is Walden’s cost of goods sold for 2014.
Pricing bonds at a discount-actual return : Calculate the price of a 3 percent coupon (annual coupons), $1,000 face value, 3-year bond if the appropriate discount rate is 5 percent.
What is the net profit and loss on your position : Suppose you buy an October expiration call option with exercise price $105. What is the net profit/loss on your position?
Pricing bonds at a discount : Calculate the price of a 3 percent coupon (annual coupons), $1,000 face value 30-year bond if the appropriate discount rate is 6 percent.
What is the actual expected return : What is the actual expected return on a US government 12-month, T-bill that is priced at $990, assuming its face value is $1,000?
What is the best estimate of the stock price per share : Based on the corporate valuation model, what is the best estimate of the stock's price per share?

Reviews

Write a Review

Financial Management Questions & Answers

  About the present value

Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target?

  Manufactures do to avoid these large exchange rate squeezes

Based in Germany, and with manufacturing and assembly exclusively located in Germany, Porsche’s entire cost base is the euro or slovakian koruna (which is managed by the slovakian government to maintain stability against the euro). In the long run, w..

  Dividends were constant and your holding period

What is the most you would pay for the stock described above if the dividends were constant and your holding period were 35 years?

  Bonds on the market making annual payments

Essary Enterprises has bonds on the market making annual payments, with nine years to maturity, a par value of $1,000, and selling for $966. At this price, the bonds yield 6.8 percent. What must the coupon rate be on the bonds?

  Precision group has estimated the potential returns

Precision Group has estimated the potential returns that may be achieved from a project, together with the likelihood of such returns occurring,

  Purchasing yen one year forward to avoid exchange rate risk

Can Jacksonville benefit from borrowing Japanese yen and simultaneously purchasing yen one year forward to avoid exchange rate risk? Explain.

  What is yield to maturity for these bonds

Each bond has a face value of $1,000 payable at maturity in 20 years. What is the yield to maturity for these bonds?

  Equilibrium interest rate and quantity of loanable funds

Graphically illustrate the effect on the equilibrium interest rate and quantity of loanable funds.

  Secondary bond trading strategy

Select the most accurate match between the secondary bond trading strategy and its description. Credit Defense Trade

  Bond deliver virtually no interest rate risk

Under what conditions/circumstances does a bond deliver virtually no interest rate risk?

  What is rate of return on each bond

One bond has a coupon rate of 6.4% , another a coupon rate of 8.2%. what is the rate of return on each bond?

  Assuming the business plan projections

Jane and Suzan are interested in organizing a new interior decorating business as 80-20 owners. Jane will contribute $80,000 in exchange for an 80% ownership interest and Suzan will contribute $20,000 for a 20% owners hip interest. Assuming the busin..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd