Question: You own a 5-year bond with a face value of $1,000 and a coupon rate of 5 percent with annual payments. The bond is currently

You own a 5-year bond with a of $1,000 and a rate of 5 percent with annual payments. The bond is currently worth $810.46. If market interest rates remain unchanged, what will be the value of the bond next year when there are 4 years left until maturity?

Step by Step Solution

★★★★★

3.46 Rating (175 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Step 1 YTM rate n per pmt pv fv N per indicates the period 5 PV indicates the price 81046 PMT ... View full answer

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1362-B-C-F-C-S(1168).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

You own a bond with a face value of $10,000 and a conversion ratio of 450. What is the conversion price?

a. If a zero-coupon bond with a face value of $1,000 payable in 1 year sells for $925, what is the interest rate? b. If another bond with the same face value and maturity sells for $900, what is the...

You own a 5% bond maturing in two years and priced at 87%. Suppose that there is a 10% chance that at maturity the bond will default and you will receive only 40% of the promised payment. What is the...

Rain Corp is issuing a 10-year bond with a face value of $1 000 with a coupon rate of 7 percent. The interest rate for similar bonds is currently 9 percent, compounded annually. Assuming annual...

You've learned how to compute price elasticity with respect to changes in interest rates (modified duration) of a bond under the flat term structure of interest rates, and parallel shifts in the term...

(a) Compute the price of the T-note. (b) Suppose that the yield curve suddenly shifted down by 0.55% (this is a parallel shift, all points on the yield curve shift by the same amount). Compute the...

You own a 5-year bond with a face value of 1,000 USD and a coupon rate of 10 percent with annual payments. The bond is currently worth 1,150 USD. If market interest rates remain unchanged, what will...

1. 2. 3. Suppose that Telstra Corporation Ltd issued a bond with 10 years until maturity, a face value of $1 000, and a coupon rate of 7.4% (annual payments). The yield to maturity on this bond when...

LaTanya Corporation is planning to issue bonds with a face value of $109, 000 and a coupon rate of 8 percent. The bonds mature in seven years. Interest is paid annually on December 31. All of the...

LaTanya Corporation is planning to issue bonds with a face value of $100 000 and a coupon rate of 8 percent. The bonds mature in seven years. Interest is paid annually on December 31. All the bonds...

Suppose a $100,000 investment grows 3% during the first year and 4% during the second year. By what percent will it have grown after the two-year period?

The beginning inventory for Waldo Co and data on purchases and sales for a three-month period are shown in Problem 7-1A. Instructions 1. Record the inventory, purchases, and cost of merchandise sold...

The value of convertible preferred stock as common stock depends on the exercise terms the dividend paid by the preferred the price of the common stock a . 1 and 3 b . 2 and 3 c . 1 and 2 d . 4 , 2 ,...

Some economists claim World War II ended the Great Depression of the 1930s. The war effort was financed by borrowing massive sums of money from the public. Explain how a war could end a recession....

Sharon Smith will receive $104 million in 30 years. The discount rate is 15% As an alternative, she can receive $9,360 today Which should she choose? Use Appendix B. (Round "PV Factor" to 3 decimal...

1. How did Marble Comics' net working capital to total assets ratio change from 2017 to 2018? 2. Which of Marble Comics' liquidity measures increased from 2017 to 2018 ? 3. What was Marble Comics'...

A firm can lease a truck for 4 years at a cost of $ 3 0 0 0 0 annually. It can instead buy a truck at a cost of $ 8 0 0 0 0 with annual maintenance expenses of $ 1 0 0 0 0 . The truck will be sold at...