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A $1,000 par value bond was issued 20 years ago at a 9 percent coupon rate. It currently has 5 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use and for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places.) percentage:

b. If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and round your answer to 2 decimal places.) Percentage:

c. Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and round your answer to 2 decimal places.)

Percentage:

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Collen Von
Collen VonLv2
28 Sep 2019

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A $1,000 par value bond was issued five years ago at a coupon rate of 12 percent. It currently has 7 years remaining to maturity. Interest rates on similar debt obligations are now 14 percent. Use Appendix B andAppendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a.

Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Current bond price $

b.

If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.)

Percentage (Click to select)LossGain %


c.

Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.)

Percentage (Click to select)LossGain %

d.

Why is the percentage gain larger than the percentage loss when the same dollar amounts are involved in parts b and c?
The percentage gain is larger than the percentage loss because the investment is larger.
The percentage gain is larger than the percentage loss because the investment is smaller.

1) A 30-year, 10% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,100. The bond sells for $1,050. (Assume that the bond has just been issued.)

What is the bond's yield to maturity? Do not round your intermediate calculations. Round your answer to two decimal places.
%

What is the bond's current yield? Do not round your intermediate calculations. Round your answer to two decimal places.
%

What is the bond's capital gain or loss yield? Loss should be indicated with minus sign. Do not round your intermediate calculations. Round your answer to two decimal places.
%

What is the bond's yield to call? Do not round your intermediate calculations. Round your answer to two decimal places.
%

2) The Brownstone Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%.

What is the yield to maturity at a current market price of $860? Round your answer to two decimal places.
%

A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,050. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan.

a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond:

b. What is her dollar profit based on the bond’s current price? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dollar profit:

c. How much of the purchase price of $1,050 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.) Purchase price paid in cash:

d. What is Ms. Bright’s percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Percentage return:

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