A GM and a Ford bond both have 4 years to maturity, a $1, 000 par value, a BB rating and pay interest semiannually. GM has a coupon rate of 6.3%, while Ford has a coupon rate of 5%. The GM bond trades at 92.35 (percent of par). What is the yield to maturity (YTM)? What should be the price of the Ford bond (in $) ?

A GM and a Ford bond both have 4 years to maturity, a $1, 000 par value, a BB rating and pay interest semiannually. GM has a coupon rate of 6.3%, while Ford has a coupon rate of 5%. The GM bond trades at 92.35 (percent of par). What is the yield to maturity (YTM)? What should be the price of the Ford bond (in $) ?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 4MC

See similar textbooks

Similar questions

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?
A GM and a Ford bond both have 4 years to maturity, a $1,000 par value, a BB rating and pay interest semiannually. GM has a coupon rate of 6.3%, while Ford has a coupon rate of 6%. The GM bond trades at 91.1 (percent of par). What is the yield to maturity (YTM)? What should be the price of the Ford bond (in $)?.
A GM and a Ford bond both have 4 years to maturity, a $1,000 par value, a BB rating and pay interest semiannually. GM has a coupon rate of 6.2%, while Ford has a coupon rate of 5.9%. a. The GM bond trades at 92.02 (percent of par). What is the yield to maturity (YTM)? b. what should be the price of ford bond?
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?
A bond that pays interest semiannually has a price of $981.73 and a semiannual coupon payment of $27.75. If the par value is $1,000, what is the current yield?
A General Power bond carries a coupon rate of 8.2%, has 9 years until maturity, and sells at a yield to maturity of 7.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will happen to the bond price if the yield to maturity falls to 6.2%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. If the yield to maturity falls to 6.2%, will the current yield be less, or more, than the yield to maturity?
A bond with a face value of $1,000 has 10 years until maturity, has a coupon rate of 5.2%, and sells for $1,105. a. What is the current yield on the bond? (Enter your answer as a percent rounded to 2 decimal places.) b. What is the yield to maturity if interest is paid once a year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.) c. What is the yield to maturity if interest is paid semiannually? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.)
Consider a bond with a face value of $1,000 that sells for an initial price of $700. It will pay no coupons for the first nine years and will then pay 11% coupons for the remaining 29 years. Choose an equation showing the relationship between the price of the bond, the coupon (in dollars), and the yield to maturity. O A. B. O C. O D. 700 = 700 = 700 = 700 = 110 110 9 (1+i)⁹ (1+i)⁹+1 + 110 + i) ⁹ + 1 (1 + 1,000 (1+i) 29-9 1,000 (1 + i) 9 +29 + +...+ 110 (1+i) 9+2 + 110 (1 + i)9+29-1 110 + (1 + i) ⁹ + 110 (1+i)9 +29 9+29-1 + 110 (1 + i)9 +29 + 1,000 (1+i) 9+29
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4? Required A Price $940.93 Complete this question by entering your answers in the tabs below. 868.39 800.92 735.40 670.48 Required B Maturity (years) 2 3 Calculate the forward rate of interest for each year. Note: Round your answers to 2 decimal places. Required C Forward Rate % % Prov 12 of 12 Next
A General Power bond carries a coupon rate of 9.2%, has 9 years until maturity, and sells at a yield to maturity of 8.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.2%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. A a. Interest payments b. Price c. Price will by
A Rio Tinto corporate bond currently sells for $1,450, which gives it a yield to maturity of 7%. Its convexity is 455. Suppose that if the yield increases by 50 basis points, the price of the bond falls to $1,400. a. What is the modified duration of this bond? b. What is the duration of this bond?
Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) Price 1 $ 998.78 2 880.89 3 815.92 4 752.40 5 685.70 a. Calculate the forward rate of interest for each year. (Round your answers to 2 decimal places.) b. How could you construct a 1-year forward loan beginning in year 3? (Round your Rate of synthetic loan answer to 2 decimal places.) c. How could you construct a 1-year forward loan beginning in year 4? (Round your answers to 2 decimal places.)