A Treasury bond has a face value of $100, a maturity of 20 years, a coupon of 4%, and pays the coupon every six months, at the end of each six month period. The price of the bond is $105. What is the yield of this bond? a. 3.65% b. 1.8% C. 1.7% d. 3.8%

A Treasury bond has a face value of $100, a maturity of 20 years, a coupon of 4%, and pays the coupon every six months, at the end of each six month period. The price of the bond is $105. What is the yield of this bond? a. 3.65% b. 1.8% C. 1.7% d. 3.8%

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 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...

See similar textbooks

Related questions

Q: Assume that you make quarterly payments of $ 575 into an annuity paying 6% interest compounded…

A: Variables in the question:PMT=$575 (quarterly payment)Rate=6% (compounded quarterly)N=12 years

Q: QUESTION 17 Suppose you purchase one share of the stock of Cereal Correlation Company at the…

A: Time-weighted return refers to the rate of return which is calculated by eliminating the…

Q: Company Z's bonds currently sell for $1233 and have a par value of $1,000. They pay a $110 annual…

A: yield to call (YTC) is the rate of return that the bond holder will earn if he holds the bond till…

Q: 20. The CDX.NA.HY Index (with 100 names) Tranches has an equity (absorbing the first 10% of defaults…

A: The objective of the question is to calculate the payout from the protection sellers of the equity…

Q: Assume that Kendal Corp. has an outstanding bond issue with a par value of $1,000 and a current…

A: Variables in the question:Par value=$1000Current market price=$1042.70N=9 yearsCoupon rate=6%

Q: What is the duration of the following bond: $1,000 par value, 6% annual coupon, 4 years to maturity,…

A: Variables in the question:Par value=$1000Annual coupon=6% (assumed paid annually)N=4 yearsYTM=6.5%

Q: Please answer the correct calculation please ASAP Don't answer by pen paper

A: The objective of the question is to calculate the real risk-free rate of return, given the nominal…

Q: Ten years ago, you deposited P5400 per month. You made the deposit for 6 years and then stopped. 4…

A: A financial concept called present worth, often referred to as present value (PV), determines the…

Q: A one-year discount factor Z(0, 1) is at 0.999 and a two-year discount factor Z(0, 2) is at 0.99.…

A: Compound interest is a financial concept that describes how the interest on an investment or loan is…

Q: Doc Brown, Inc. just paid a dividend of D0 = $1.21. Analysts expect the company's dividend to grow…

A: Variables in the question:D0=$1.21Growth::Year 1=20%Year 2=20%Year 3 and thereafter=6%Required…

Q: share. The company has announced a dividend of $2.25 per share with an ex-dividend date of February…

A: Ex-dividend value of the stock is the price of the stock after deducting the dividend declared. A…

Q: Ticker AMZN MSFT AAPL TSLA Visa V SPOR S&P 500 ETF Trust SPY Portfolio Beginning Value (PBV) S&P 500…

A: A portfolio is a mix of financial holdings that a person, business, or other entity has, including…

Q: The current price of Exotic Foods stocks is $80 with 2 million shares outstanding. In a world of no…

A: The objective of the question is to calculate the impact on Exotic Foods share price of a five to…

Q: Required information A company that manufactures magnetic flow meters expects to undertake a project…

A: Cash flow refers to the movement of money into or out of a business or financial system, typically…

Q: A Treasury bond has a face value of $100, a maturity of 20 years, a coupon of 4%, and pays the…

A: The objective of this question is to calculate the yield of a Treasury bond given its face value,…

Q: An investor is considering purchasing a property with a forecasted first-year NOI of $175,000. The…

A: NOI = $175,000Cap rate = 9.25%property value =?

Q: A stock had returns of 14.83 percent, 19.47 percent, -17.19 percent, 12.59 percent, and 27.07…

A: Variance is the measure to explain the deviations of the individual return from the average…

Q: You want to purchase a car 4 years from now, and you plan to save $4,500 per year, beginning…

A: Annuity refers to a regular stream of cash flows which occurs over a definite period. If it occurs…

Q: Suppose you observe the following situation: Probability of State 0.15 0.60 0.25 State of Economy…

A: Expected return refers to the rate of return that is being earned by the investors over the amount…

Q: Aasim Corporation has an opportunity to invest in a machine to manufacture soft drinks for period of…

A: Net cash flow refers to the total amount of cash generated or consumed by a business or a specific…

Q: The following partial valuation equation can be calculated by applying call option valuation…

A: Call option pricing models, such as the Black-Scholes model, typically involve the following…

Q: Horticultural Products Inc. reported $1,324,050 profit in 2023 and declared preferred dividends of…

A: Net profit = $1324050Preferred dividend = 65100Earnings per share is calculated as the net profit…

Q: Weismann Co. issued 18-year bonds a year ago at a coupon rate of 8 percent. The bonds make…

A: The objective of the question is to calculate the current price of the bond issued by Weismann Co.…

Q: Merit Inc. has zero coupon debt outstanding that will have to be repaid in three years, with a face…

A: Equity in finance signifies ownership interest in a company and is a crucial element of its capital…

Q: XYZ Corp. will pay a $2 per share dividend in 2 months. Its stock price currently is $72 per share.…

A: A call option is a financial contract that gives the holder the right, but not the obligation, to…

Q: One coffee shop business in TX borrowed $3,000 and was scheduled to pay back $3,330 by paying 11% of…

A: Effective interest rates, which take compounding over a given time period into account, show the…

Q: You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The…

A: Net Present Value:NPV measures the potential increase in wealth that an investment can generate. To…

Q: Xtra Mechanical, Inc. is a manufacturer of machine parts with locations in the United States. It is…

A: NPV refers to the present value of the future cash flows, Future cash flows is the operating cash…

Q: A client currently has $100,000 earmarked for retirement and expects a 7% annual return on the…

A: Current holding = PV = $100,000Annual return = rate = 7%Retirement age = 67Current age =…

Q: Bradley Corporation's required rate of return is 14 %. The company has an opportunity to be the…

A: Net present value refers to the method of capital budgeting used for determining the difference…

Q: Donna Donie, an option analyst at UMB Students Managed Fund, believes that the market will be…

A: Options are derivatives products that gives the opportunity to buy or sell sell stock on expiration…

Q: A firm is considering two alternatives that have no salvage value. At the end of 4 years, another B…

A: Net present value is the present value of inflows less present value of outflows.EUAW is effective…

Q: estion Two Ms. Duke is borrowing 12,000 at a compound annual interest rate of 17%. Determine the…

A: i) Borrowing amount₡12,000Interest rate17%Number of years7ii) Rate8%Amount₡750iii) Current…

Q: According to the CAPM, a stock's expected return is positively related to its beta. True or False…

A: The Capital Asset Pricing Model (CAPM) is a financial model that establishes a linear relationship…

Q: United Snack Company sells 40-pound bags of peanuts to university dormitories for $48 a bag. The…

A: The objective of the question is to calculate the break-even point in bags for United Snack Company.…

Q: JADO Mfg. is trying to decide which one of two machines to purchase. Machine A costs $398,000, has a…

A: Machine AMachine BInitial cost$398,000$510,000Useful life5 years4 yearsPre-tax annual operating…

Q: Prepare the Statement of Financial Position and Cash flow for 2022 in line with ISAPS. Expenses…

A: Statement of Financial Position as of December 31, 2022: AssetsAmount ($000)Liabilities and…

Q: Solve for the unknown interest rate in each of the following: (Your answers should be positive…

A: Interest Rate = (Future Value / Present Value)^(1 / Time) - 1

Q: 3) It is now Jan 1, 2016. You have analyzed DuckCo's future product launches, markets, and…

A: Free cash flow method is used to evaluate the value of the firm and with which we can determine the…

Q: find the term of the loan n if the amount of interest paid in the 10th payment is 300

A: Amortization is the process of repaying the loan. In an amortizing loan, a portion of each monthly…

Q: Calculate Internal Rate of Return to the investor based on a sale of the project at 12/31/26 using a…

A: Internal Rate of Return is a financial metric that measures the potential profitability of an…

Q: “Let's assume that you are an entrepreneur who organizes auction” 1) Which type of auction would…

A: An entrepreneur is an individual who starts and operates a business, taking on financial and…

Q: The ERR is %. (Round to two decimal places.) A maximum of IRR value(s) is(are) suggested by the…

A: Multiple IRR is a scenario where an Investment gives an NPV of Zero for more than one Required Rate…

Q: b. At February 2, 2015, HD's NFL was $15,474 million. What was HD's operating value (Voper) at…

A: The implied growth rate is a financial metric that reflects the expected rate at which a company's…

Q: 1 . Which investor type would most likely have high tolerance for risk, long investment horizon, and…

A: The first question is asking which type of investor is most likely to have a high tolerance for…

Q: Why would investors looking to have a diversified stock portfolio view a negative covariance in…

A: The correct option is:A negative covariance means the stocks would not behave the same way, which…

Q: 3. Consider two efficient por risk (standard deviation) of 5%. An investor will place portfolio A…

A: Portfolio beta is a metric that helps in measuring the portfolio sensitivity considering the market…

Q: A stock is currently trading for $38. The company has a price-earnings multiple of 10. There are 100…

A: “Since you have posted multiple questions with multiple sub parts, we will provide the solution only…

Q: 4. You are planning your retirement in 15 years. You currently have $125,000 in a bond account and…

A: Retirement refers to the period in a person's life when they cease working and typically withdraw…

Q: please help me to answer 8, 9, 10 and 11.

A: “Since you have posted multiple questions, we will provide the solution only to the first specified…

Question

A Treasury bond has a face value of $100, a maturity of 20 years, a coupon of 4%, and pays the coupon
every six months, at the end of each six month period. The price of the bond is $105. What is the yield of
this bond?
a. 3.65%
b. 1.8%
C. 1.7%
d. 3.8%

AI-Generated Solution

AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.

Unlock instant AI solutions

Tap the button
to generate a solution

Click the button to generate
a solution

SEE SOLUTION

Similar questions

Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield?
Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table:
Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?
Default Risk Premium A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?
Yield to Maturity and Current Yield You just purchased a bond that matures in 5 years. The bond has a face value of 1,000 and an 8% annual coupon. The bond has a current yield of 8.21%. What is the bonds yield to maturity?
Bond 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?
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 1 2 29 30 Cash Flows $20.37 $20.37 $20.37 $20.37 + $1,000 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value?
A bond pays annual interest. Its coupon rate is 8%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 6%.The duration of this bond is _______ years. Group of answer choices A. 3.36 B. 3.23 C. 3.08 D. 3.59