If a bond is issued at the price of $10,000 per contract and promises a 5.7% interest every year, the contract will be redeemed by the issuer at a discount after 8 years for $9,200. If the market is offering a return of 4.8% for similar risk securities, what would be the price you are ready to offer for this bond?
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If a bond is issued at the price of $10,000 per contract and promises a 5.7% interest every year, the contract will be redeemed by the issuer at a discount after 8 years for $9,200. If the market is offering a return of 4.8% for similar risk securities, what would be the price you are ready to offer for this bond?
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- Your broker offers to sell you a CleenWtr Bond for $1150. The bond has a coupon rate of 3%, semiannual interest payments, and a maturity of 9 years. If the interest rate on comparable debt is 2.0% is your broker fairly pricing the bond? (What is the curent price of the bond)You are considering the purchase of a perpetual bond that pays you $174 per year for the foreseeable future. If you require a 5.85% rate of return on this bond investment, what is a fair price for the bond that you would be willing to pay today? To nearest $0.01In the bond market, a 1-year Treasury bond currently yields 10%, and a 2-year bond yields 12.0%. An investor wants to invest for a 2-year horizon is choosing between buying a 1-year security and hold it for 1 year and reinvest the proceeds in another 1-year security or buying the 2-year security and hold it for 2 years. What would be the rate of the 1-year rate 1 year from now so that both options will be indifferent under the pure expectation theory? (In percentage)
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- A 1-year treasury bond currently yields 8%, and a 2-year bond yields 10%. An investor who wants to invest for a 2-year horizon is choosing between alternatives of buying the 2-year security and hold it for 2 years or buying a 1-year security and hold it for a year and reinvest the proceeds in another 1-year security. What would be the rate of the 1-year rate one year from now so that options of the investor will be indifferent holding the pure expectation theory? 13.05% 11.02% 12.04% 10.40%You can enter into a forward contract for a bond with a maturity in one year months that pays a coupon payment of $25 every six months. The bond has a forward price of $930. The current zero coupon rate for 6 months is 4% annually and the zero coupon risk free rate for one year is 5% annually (assume continuous compounding). The current price of the bond is $943. Use the equilibrium forward price equation (F=Sert) adjusted for both coupon payments to see if an arbitrage opportunity exists. If arbitrage is possible, explain the arbitrage opportunity that exists and show how the profit can be earned – make sure to explain every step in detail in realizing the profit and establishing the arbitrage. If arbitrage is not possible, show how you know it is not possible. ANSWER IN TYPING OTHER WISE DOWNVOTE YOUA 1-year Treasury bond currently yields 6.0%, and a 2-year bond yields 7.0%. Mr. A, an investor who want to invest for a 2-year horizon is choosing between buying the 2-year security and hold it for 2 years and buy a 1-year security and hold it for 1 year and reinvest the proceeds in another 1-year security. Holding the pure expectation theory, what would be the rate of the 1-year rate 1 year from now so that options of Mr. A will be indifferent? 8% 6% 7% 6.5%
- Suppose for $1,000 you could buy a 10%, 10-year, annual payment bond or a 10%, 10-year, semiannual payment bond. They are equally risky. Which would you prefer? If $1,000 is the proper price for the semiannual bond, what is the equilibrium price for the annual payment bond?Assume that you wish to purchase a bond with a 17-year maturity, an annual coupon rate of 11.5%, a face value of $1,000, and semiannual interest payments. If you require a 9.5% return on this investment, what is the maximum price you should be willing to pay for the bond?1)Your broker offers to sell for $1,157 a AAA-rated bond with a coupon rate of 7 percent and a maturity of six years. Given that the interest rate on comparable debt is 4 percent, calculate the bond's price. Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. 2)Is your broker fairly pricing the bond? 3)the bond should or should not be purchased?