Question

8) A five-year coupon bond with a face value of $1000 is sold in the primary market. The interest rate is 8%. Immediately after receiving the second coupon payment the bondholder sells the bond into the secondary market. At the time of resale the interest rate has dropped to 6%. What is the resale price of the bond?
a) 948.46
b) 986.29
c) 1025.31
d) 1053.46

0 0
Add a comment Improve this question Transcribed image text
Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
8) A five-year coupon bond with a face value of $1000 is sold in the primary...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
  • Suppose you purchase 5-year annual coupon bond in the primary market. The face value of the...

    Suppose you purchase 5-year annual coupon bond in the primary market. The face value of the bond is $1000. The current risk-free interest rate is 2%. The bond belongs to an asset class appropriated a 3% risk premium. a) After a year has passed, you collect your coupon payment. At that point, a new investment becomes available to you and you decide to sell your bond in the secondary market. By the time of the sale, the economic outlook has...

  • a) (5 points) Calculate the price of a $1000 face value five year coupon bond when...

    a) (5 points) Calculate the price of a $1000 face value five year coupon bond when the yield to maturity is 5%, and the coupon rate is 6%. b) (5 points) Now suppose that the yield to maturity rises to 7%. Calculate the new price of this coupon bond. c) (5 points) Suppose you purchased the bond at it original price (yield to maturity = 5%) held it for one year (collected one coupon payment) and sold it at the...

  • 4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments...

    4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount. b) Calculate the price of this bond. c) Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...

  • 4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments...

    4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount b) Calculate the price of this bond. c Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...

  • (1 point) A 9-year bond with a face value of 1000 dollars is redeemable at par,...

    (1 point) A 9-year bond with a face value of 1000 dollars is redeemable at par, pays coupons at 5.9 percent per 6 months, and has a yield rate of 7.6 percent convertible semiannually. Suppose the book value immediately after the payment of the 7th coupon is equal to the price of a perpetuity (at the time of the 7th coupon) that will start making annual payments one year after the 7th coupon. If the perpetuity earns interest at 3.9...

  • Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and...

    Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. 4) a Without any calculation, briefly explain whether this bond will be selling a premium or a discount. b) Calculate the price of this bond. c) Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...

  • Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and...

    Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount. b) Calculate the price of this bond. c) Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what should...

  • 4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments...

    4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount Calculate the price of this bond Calculate the duration of this bond Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what should happen to...

  • 4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments...

    4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount. b) Calculate the price of this bond. c) Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...

  • 1. You own a 20-year, $1000 face value bond paying 8% coupon annually. If market price...

    1. You own a 20-year, $1000 face value bond paying 8% coupon annually. If market price of the bond is 1000, what should be the Yield to Maturity of the bond? You also own a 20-year, $1000 face value bond paying 8% coupon annually. What should be the market price of the bond so that its Yield to Maturity is exactly 10%?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT