A bond with an annual coupon rate of 4.8% sells for $970. What is the bond's current
Question:
A bond with an annual coupon rate of 4.8% sells for $970. What is the bond's current yield?
Step by Step Answer:
To calculate the bonds current yield you need to divide the annual coupon payme...View the full answer
Investments
ISBN: 9781259271939
9th Canadian Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus, Lorne Switzer, Maureen Stapleton, Dana Boyko, Christine Panasian
Related Video
Bond valuation is the process of determining the worth of a bond. It is based on the present value of the bond\'s future cash flows, which include coupon payments and the return of the bond\'s face value (or \"principal\") at maturity. The discount rate used in the calculation is directly tied to prevailing interest rates, and a rise in interest rates will decrease the present value of the bond and thus lower its price. Conversely, a fall in interest rates will increase the present value of the bond and raise its price. Interest rates serve as a benchmark for determining the value of a bond, as they determine the discount rate used in the bond valuation calculation. The most commonly used measure of interest rates is the yield to maturity (YTM), which represents the internal rate of return of an investment in a bond if the investor holds the bond until maturity and receives all scheduled payments. Yield to maturity is a function of the coupon rate, the current market price of the bond, the face value of the bond, and the number of years remaining until maturity. By comparing the yield to maturity of a bond to prevailing market interest rates, an investor can assess the relative value of the bond.
Students also viewed these Business questions
-
A bond with an annual coupon of $100 originally sold at par for $1,000. The current yield to maturity on this bond is 9%. Assuming no change in risk, this bond would sell at a_____________ in order...
-
Suppose you bought a bond with an annual coupon rate of 6.5 percent one year ago for $1,032. The bond sells for $1,020 today. a. Assuming a $1,000 face value, what was your total dollar return on...
-
Suppose you bought a bond with an annual coupon rate of 5.5 percent one year ago for $1,017. The bond sells for $1,041 today. a. Assuming a $1,000 face value, what was your total dollar return on...
-
Write inequalities to describe the set. The slab bounded by the planes z = 0 and z = 1
-
What happens to variances known as over- and under applied overhead?
-
The actual cash received from cash sales was $25,538, and the amount indicated by the cash register total was $25,670. Journalize the entry to record the cash receipts and cash sales.
-
In I.C. engines, power developed inside the cylinder is known as: (a) Brake horse power (b) Indicated horse power (c) Pumping power (d) None of the above
-
Cost-plus, target pricing, working backward. The new CEO of Roile Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following...
-
Barco Kyan Company Company Barco Company Kyan Company Data from the current year-end balance sheets Assets Cash $18,500 $ 32,000 Accounts receivable, net 36,400 Merchandise inventory 84,940 Prepaid...
-
A 30-m steel tape measured 29.991 m when standardized fully supported under a 5.500-kg pull at a temperature of 20C. The tape weighed 1.22 kg and had a cross-sectional area of 0.016 cm2. What is the...
-
A put on XYZ stock with a strike price of $40 is priced a t $2.00 per share, while a call with a strike price of $40 is priced at $3 .50. What is the maximum per-share loss to the writer of the...
-
In September 2015. a 3.45 megawatt cooling, heating. and power (CHP) system was placed in into operation for Southeast Regional Hospital with 360 beds. The CHP system was pan of a new 20,000 sq. ft....
-
A simple regression produces the regression equation Y-bar = 5X + 7. a. If we add 2 to all the X values in the data (and keep the Y values the same as the original), what will the new regression...
-
Derrick works as a team psychologist for the Leopards, a professional soccer team in New York. After work one night, Derrick gets into a drunken brawl with patrons at a bar in Queens. The fight...
-
Match the term with its definition. Question 69 options: A bond where the issuer never has to pay back the principal or face amount of the bond, but is committed to making interest payments in...
-
Why do we punish criminal offenders? What do you believe should be the goal of criminal punishments? Discuss the difference between "specific" and "general" deterrence
-
Based on the case, course materials, and your understanding of price ceilings and floors, answer the following questions: Why did the Swiss National Bank (SNB) implement a price ceiling in 2011? How...
-
You computed 30 regression betas for a small industry. The average beta is 1.7. The average debt to equity ratio for these firms is 0.4. The tax rate is 0.24. What is the unlevered beta for the...
-
Imagine a huge space colony that consists of a rotating air-filled cylinder. How would the density of air at "ground level" compare to the air densities "above"?
-
How do network effects help Facebook fend off smaller social-networking rivals? Could an online retailer doing half as much business compete on an equal footing with Amazon in terms of costs? Explain.
-
A portfolio consists of assets with the following expected returns: a) What is the expected return on the portfolio? b) What will be the expected return if the individual reduces the holdings of the...
-
You are given the following information concerning two stocks: a) What is the expected return on a portfolio consisting of 40 percent in stock A and 60 percent in stock B? b) What is the standard...
-
You are given the following information: a) What are the expected returns and standard deviations of a portfolio consisting of: 1. 100 percent in stock A? 2. 100 percent in stock B? 3. 50 percent in...
-
300 STA 0+00 STA 10+00 -00 350 5. Develop a mass diagram for the airfield cut through the site (Figure No. 1). Contour lines are established at 10-foot intervals of elevation. a. Estimate cut or fill...
-
Sweet Acacia Enterprises began operations on January 1, 2024. During 2024 and 2025, the company entered into the following transactions: 2024 2025 1. Cash collected from customers during the year for...
-
Whirly Corporation's contribution format income statement for the most recent month is shown below: Sales (8,500 units) Variable expenses Contribution margin Fixed expenses Net operating income...
Study smarter with the SolutionInn App