Question: need help answering part 2 (1) What is the yield to maturity on a 10 -year, 9% annual coupon, $1,000 par value bond that sells

need help answering part 2

(1) What is the yield to maturity on a 10 -year, 9% annual coupon, $1,000 par value bond that sells for $887.00 ? That sells for $1,134.20 ? What does the fact that a bond sells at a discount or at a premium tell you about the relationship between rd and the bond's coupon rate? Yield to maturity for $887.00:11% Yield to maturity for $1,134,20:7% Whether a bond sells at a discount rate or a premium rate is based on the bonds initial discount rate. The bond will be sold at a premium if the discount rate is less than the bonds coupon rate. The bond will be sold at a discount rate if the discount rate is greater than the coupon rate. (2) What are the total return, the current yield, and the capital gains yield for the discount bond? (Assume the bond is held to maturity and the company does not default on the bond.)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

International Textile Company, Ltd., is a Hong Kong?based firm that distributes textiles worldwide. The company is owned by the Lao family. Should the People's Republic of China continue its economic...

QUESTION 33 A stock has the following probability distribution: If economy is good (the probability is 20%), its expected stock return is 20%; if economy is on average (the probability is 60%), its...

Question 3: (Word limit 2000) palagirism maximum 20%. Companies often issues bonds to raise fund for their expansion. The HBIS Group of China, one of the largest Iron and Steel companies of the world...

What is the current yield, the capital gains yield, and the total return in the preceding question? Preceding Question: "What is the yield to maturity on a 10-year, 9 percent annual coupon, $1,000...

Details in formula and caculation please so that I can understand. Thankyou. Part C (1) What is the yield to maturity on a 10-year, 11.5% annual coupon, $1,000 par value bond that sells for $887.00...

What is the yield to maturity on a 10-year, 9 percent annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does the fact that a bond sells at a discount or at a...

please answer both ASAP One year ago, an investor purchased a 10 -year 8% annual coupon bond at par of $1,000. Today (with 9 years to maturity) the bond is priced to yield 7.75%. If the bond is sold,...

Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Group Health Cooperative and Co-directors of the organization's pension fund management division. The unions that represent the...

please solve step by step with formula . without financial calculator What is the yield to maturity (YTM) on a 10 -year, 9% annual coupon, $1,000 par value bond that a) sells for $909.75 b) sells for...

Robert Campbell and Carol Morris are senior vice presidents of the mutual of Chicago Insurance Company. They are co-directors of the companys pension fund management division, with Campbell having...

ORIENTAL ASSET MANAGEMENT CORPORATION BOND VALUATION Lee Teng and Hu Feng are vice presidents of Oriental Asser Management and co-directors of the companys pension fund management division. A major...

Logan Company produces two products, Standard and Premier. Logan can sell all of the Standard and Premier products it can produce, but it has limited production capacity. Machine hours per unit for...

What labor markets should be considered when recruiting to fill an opening for a sales representative for a pharmaceutical manufacturer?

Loose on contribute 2 5 , 0 0 0 in cash for 2 5 % interest rate in a partner partnership he also contributed property with an adjusted basis of 2 5 , 0 0 0 and liability of 2 0 , 0 0 0 what is loose...

CT Corp Comprehensive Question Canadian Tire Corporation, Limited (Canadian Tire) is a family of companies that includes a retail segment and a financial services division, among others. The retail...

(For students who were assigned Chapter 9) Use the aggregate expenditures model to show how government fiscal policy could eliminate either a recessionary expenditure gap or an inflationary...

KEY QUESTION Assume that a hypothetical economy with an MPC of .8 is experiencing severe recession. By how much would government spending have to increase to shift the aggregate demand curve...

KEY QUESTION Define the standardized budget, explain its significance, and state why it may differ from the actual budget. Suppose the full-employment, noninflationary level of real output is GDP 3...