Assume a face value of a bond JD 1000, when the bond reaches maturity, if it is selling at:a. JD 900, bond value goes down to JD 850b. JD 1000, bond value goes down to JD 900c. JD 1100, bond value goes up to JD 1200 d. JD 1050, bond value goes down to JD 1000
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Assume a face value of a bond JD 1000, when the bond reaches maturity, if it is selling at:
a. JD 900,
b. JD 1000, bond value goes down to JD 900
c. JD 1100, bond value goes up to JD 1200
d. JD 1050, bond value goes down to JD 1000
Step by step
Solved in 2 steps
- Assume you have treasury note .The contract price is 124 and you can deliver either bond A with conversion of 0.9 and price of 110 or a bond with conversion of 0.7 and price is 100. What will be the loss gain of the buyer? ( 1.77 -1.77 9.3 -9.3Calculating the risk premium on bonds The text presents a formula where (1+1) = (1-p)(1 +i+x) + p(0) where i is the nominal interest rate on a riskless bond x is the risk premium p is the probability of default (bankruptcy) If the probability of bankruptcy is zero, the rate of interest on the risky bond is When the nominal interest rate for a risky borrower is 8% and the nominal policy rate of interest is 3%, the probability of bankruptcy is %. (Round your response to two decimal places.) When the probability of bankruptcy is 6% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) When the probability of bankruptcy is 11% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) The formula assumes that payment upon default is zero. In fact, it is often positive. How would you change the formula in this case?…A bond is currently selling for $980. This is a _____ bond which will ultimately experience a capital _____. Premium; gain Premium; loss Discount; gain Discount; loss
- Suppose a sixy ear bond is purchased for $4800. The face value of the bond when it matures is $7032. Find the APR.How do investors calculate the net present value of a bond? If a bond's coupon payment is C, the interest rate is R, and the bond's coupon payment is made in each period for T years at which time the original principal, P, is repaid, then the bond's present discounted value (PDV) is C A. PDV = + (1 + R) (1 + R? (1 + R)T B. PDV = C(1 + R) + C(1 + R)2 - + C(1 + R)T + P(1 + R)T + C P OC. PDV = - + R R2 RT RT C D. PDV = P + C C (1 + R) (1+R)2 (1 + R)T C E. PDV = + + + + (1 + R) (1+ R)2 (1 + R)T (1 + R)T If the interest rate is 9 percent, what is the present value of a perpetuity that pays $50,000 each year, forever? The perpetuity's value is $ (Enter a numeric response rounded to two decimal places.)The following information about bonds A, B, C, and D are given. Assume that bond prices admit noarbitrage opportunities. What is the convexity of Bond D?Cash Flow at the end ofBond Price Year 1 Year 2 Year 3A 91 100 0 0B 86 0 100 0C 78 0 0 100D ? 5 5 105
- A bond with a face amount of $12,000 has a current price quote of 107.15. What is thebond’s price?a. $12,107.15b. $1,285.80c. $12,858.00d. $128,580A bond with a principal of $1,000 a. will sell for the market determined price. O b. will always sell for more than $1000. O C. will always sell for exactly $1000. O d. will always sell for less than $1000.A bond has a conversion price of $12 and a face value of $2,000. The conversion ratio is ?
- Given the information below, which bond(s) will be issued at a discount? Stated Rate of Return Market Rate of Return. Bond 1. O Bond 2. Bond 4. O Bonds 1 and 2. Bond 1 5% 7% Bond 2 7% 8% Bond 3 12% 12% Bond 4 10% 9%If a P1,000 bond sells for P1,125, which of the following statements are correct? I. The market rate of interest is greater than the coupon rate on the bond. II. The coupon rate on the bond is greater than the market rate of interest. III. The coupon rate and the market rate are equal. IV. The bond sells at a premium. V. The bond sells at a discount. a. I and IV b. I and V c. II and IV d. II and VCalculate the yield to maturity for each bond and discuss whether it sells at par, discount, or premium? O A. Bond YTM A O B C O B. Bond A B с C. Bond A B C с O D. Bond A B с 12.71% Discount 12.00% 10.22% YTM Sells at par/discount/premium YTM Premium Discount Sells at par/discount/premium Discount 12.71% 12.00% Par 10.22% Premium Sells at par/discount/premium Premium 12.71% 12.00% Par 10.22% Premium Sells at par/discount/premium Discount YTM 10.22% 12.00% Par 12.71% Premium Bond Par value Coupon interest rate $1000 9% $1000 12% $500 A B C 12% Years to maturity 18 16 12 Current value $820 $1000 $560