• 100% Satisfaction Guarantee

Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7291
Experience:  Post Graduate Diploma in Management (MBA)
19873544
Linda_us is online now

# A bond with 5 years to maturity and a coupon rate of 6% has

### Customer Question

A bond with 5 years to maturity and a coupon rate of 6% has a face value of \$20,000.
Interest (coupon payment) is paid annually
a. If an investor's required rate of return is 7% on this bond, how much is this investor
willing to pay for this bond?
b. Please use this bond as an example, to explain the relationship that exists between
the following elements of a bond: coupon rate, required rate of return (YTM), par value,
and bond price.
Submitted: 6 years ago.
Category: Homework
Expert:  Linda_us replied 6 years ago.
HiCustomerbr />
a) If an investor's required rate of return is 7% on this bond he would be willing to pay 19179.96.

b) If required rate of return(YTM) is greater than coupon rate then bond price is less than face value and if required rate of return(YTM) is less than coupon rate then bond price is more than the face value of the bond. Since in the current case YTM of 7% is greater than coupon rate of 6% hence the bond value is 19179.96 which is less than the face value.

Regards

Linda
Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7291
Experience: Post Graduate Diploma in Management (MBA)
Customer: replied 6 years ago.
Can you help me with another question?
Expert:  Linda_us replied 6 years ago.
HiCustomer

I can try. You can accept this post if you are satisfied and then post your second question in a second post.

Regards

Linda
Customer: replied 6 years ago.
Suppose you bought the following bond for \$1100. The bond has a face value of \$1000,
annual coupon rate 10% payable annually, and matures in 2 years. Please answer the
following questions:
a. What is the bond's current yield?
b. What is the bond's yield to maturity?
c. Exactly one year later, interest rate rises to 15% due to inflation increase. If your
holding period is only one year, i.e., you have to sell the bond after one year, what price
would you end up selling at? What will be your rate of return for holding this bond for one
year?
d. Please use this bond as an example to explain the interest rate risk when investing in
bonds.
Customer: replied 6 years ago.
Did you get the 2nd question? I gave you 10 dollars,will that work?
Expert:  Linda_us replied 6 years ago.

You need to spend \$3 to view this post. Add Funds to your account and buy credits.
Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7291
Experience: Post Graduate Diploma in Management (MBA)
Customer: replied 6 years ago.
Linda, you are amazing, this works!

Can you shoot me your email, I would love to get with you from here on out on my homework to double check it. I have 4 more classes and my homework questions consist of minimal questions - so no room for error.

If this is the best way, I will look for you. Do i just ask for you? What hours are you online? Thank you so much!

[email protected]
Expert:  Linda_us replied 6 years ago.
HiCustomerbr />
I can't share my email id it against the policy. In future you can post your question in JA and address them to me by writing "FOR LINDA" in front of your post. I am usually online and I will try to complete your question ASAP.

Regards

Linda

Customer: replied 6 years ago.
Perfect, thank you so much! Did you get your money? I want to make sure you're taken care of... thanks!
Expert:  Linda_us replied 6 years ago.
Yes I got it.

Thanks for quick acceptance and positive feedback.

Regards

Linda

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

### What Customers are Saying:

• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
< Previous | Next >
• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
• This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
• Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
• I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin Kernersville, NC
• Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther Woodstock, NY
• Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know. Robin Elkton, Maryland
• He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here. Diane Dallas, TX

• ### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML
< Last | Next >

### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML

### Manal Elkhoshkhany

#### Satisfied Customers:

4538
More than 5000 online tutoring sessions.

### Linda_us

#### Satisfied Customers:

3138
Post Graduate Diploma in Management (MBA)

### Chris M.

#### Satisfied Customers:

2602
Master's Degree, strong math and writing skills, experience in one-on-one tutoring (college English)

### F. Naz

#### Satisfied Customers:

2126
Experience with chartered accountancy

### Bizhelp

#### Satisfied Customers:

1887
Bachelors Degree and CPA with Accounting work experience

### Seanna

#### Satisfied Customers:

1781
3,000+ satisfied customers, all topics, A+ work