A 6-year annual payment corporate bond has a required return of 9.5% and an 8% coupon. Coupon = $30.68 per year or 3.068%. The bond pays a $40 coupon every six months. Answer: Calculation of bond's price (Amount in $) Year Half years (Working Note 2) Discount Factor (Working Note 3) Amount 1 3.5 0.971 3.398 1 3.5 0.971 3.398 2 3.5 0.943, An 8 year corporate bond pays has a 7% coupon rate. All types of bonds pay an annual interest to the bondholder, and the amount of interest is known as the coupon rate. a. The bond matures 20 years from now. A corporate bond has a face value of $1,000 and an annual coupon interest rate of 8%. An 8 Year Corporate Bond Pays Has A 7% Coupon Rate. 8-10. Market interest rates on similar bonds are 7%. If the bond is priced to yield 6%, what is the bond's current price? Bond A has a bigger coupon than Bond B. II. An 8-year Treasury bond has a 10 percent coupon. Bond Coupon Rate vs. Interest. | A corporate bond returns 12% of its cost (in PV terms) in the first year, 11% in the second, year, 10% in the third year and the remainder in the fourth year. A semiannual payment bond with a $1,000 par has a 7% quoted coupon rate, a 7%. The company board of director was decided to offer 1,000 no. required return, which of the following is/are true? The bond has a face value of $1,000. $1062.81 B. The bond is selling at a discount because its coupon yield of 8% is less than the market demanded yield of 8.21%. What should be the bond's price if he required return is 6% and the bond pay interest semiannually? Your tax rate is 30 percent. a. required return is 6% and the bond pays interest semiannually? Corporate Bond B returns 8% of its cost in PV terms in, each of the first five years and 60% of its cost in the sixth year. 13.49 percent. $939.53 $1,062 81 $1,035.81 $1,052 99 $1,062.10. Answer is B. I need a full detail of why. O c. The bond's current yield is above 9%. Calculate the bond… Suppose you purchase an IBM Corp . A corporate $10,000 bond has a coupon rate of 8% per year, payable semiannually. 33. A 15-year corporate bond pays $40 interest every six months. Let us take the example of a bond with quarterly coupon payments. What is the coupon payment for a 5-year bond that is selling at par and the current discount rate is 6.75%? Each bond has a par value of $1,000 with a coupon rate of 8%, and it is to mature in 5 years. b. A corporate bond has a face value of $1,000 and an annual coupon interest rate of 7%. Step #3: Finally, the formula of the coupon rate of the bond is calculated by dividing the annualized interest payments by the par value of the bond and multiplied by 100%, as shown below. The discount rate in first year (2005) was 10 percent. DeVry University, Keller Graduate School of Management, California State University, Long Beach • FIN 360, DeVry University, Keller Graduate School of Management • FINANCE 564, University of California, Riverside • BUS 106, Texas A&M University, Kingsville • BUS 101. If A and B have the same. After that market rate of return had increased to 14 % in 2007. of bonds of par value of $10 each in 2004; carrying 15 percent coupon rate and 5 year maturity period, bond would mature in 2009. What is the bond's price if, 30. What Should Be The Bond's Price If The Required Return Is 6% And The Bond Pays Interest Semiannually? The bond's price is $996.76. 16.27 Suppose that a three-year corporate bond provides a coupon of 7% per year payable semiannually and has a yield of 5% (expressed with semiannual compounding). O b. Solution for A bond has an annual 8 percent coupon rate, a maturity of 10 years, a face value of $1000 and makes semi-annual payments. A 20 year corporate bond has 7% coupon rate (annual payment) and a par value of $1,000. If the bond's yield to maturity declines, the bond will sell at a discount. What should be the bond's price if the required return is 6 percent and the bond pays interest semiannually? Suppose a seven-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading with a yield to maturity of 6.75%. $1062.10 C. … The current market price of the bond is … O d. Let us assume a company XYZ Ltd has issued a bond having a face value of $1,000 and quarterly interest payments of $15. Which of the following statements is CORRE O a. For example, a bond with a face value of $ View desktop site. To the nearest whole percent, what is the yield to maturity (YTM) of the bond … A 12-year bond has an 8 percent semiannual coupon and a face value of $1,000. Both bonds pay interest annually, have 11-year maturities, and sell at a yield to maturity of 8.0%. Course Hero is not sponsored or endorsed by any college or university. 28. A corporate bond has a coupon rate of 10% and a required return of 10%. 35. The bond's annual Err must Chapter 03 - Interest Rates and Security Valuation, 29. This bond's, 31. What is the bond's duration? Is this bond currently trading at a … 32. 34. Here is an example calculation for the purchase price of a $1,000,000 face value bond with a 10 year duration and a 6% annual interest rate. What should be the bond's price if the required return is 6% and the bond pays interest semiannually? An 8-year corporate bond has a 7% coupon rate. An 8 - year corporate bond has 7% coupon rate. Terms The bond's annual E (r) must be A. 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