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Linda_us, Finance, Accounts & Homework Tutor

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Experience: Post Graduate Diploma in Management (MBA)

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

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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.

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.

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Linda

Linda_us and 3 other Homework Specialists are ready to help you

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 7 years ago.

Did you get the 2nd question? I gave you 10 dollars,will that work?

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!

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.