Question: A ( $ 1,000 ) par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 25 years remaining

A \\( \\$ 1,000 \\) par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when It had a price of \\( \\$ 1,005 \\). Further assume Ms. Bright pald 30 percent of the purchase price in cash and borrowed the rest (known as buylng on margin). She used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. Note: Input your answer to 2 decimal places. b. What is her dollar profit based on the bond's current price? Note: Do not round Interm edlate calculations and round your answer to 2 decimal places. c. How much of the purchase price of \\( \\$ 1,005 \\) did Ms. Bright pay in cash? Note: Do not round Intermediate calculations and round your answer to 2 decimal places. d. What is Ms. Bright's percentage return on her cash Investment? Divide the answer to part \\( b \\) by the answer to part \\( c \\) Note: Do not round Intermedlate calculations. Input your answer as a percent rounded to 2 decimal places
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
