FINANCE

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  1. You purchase a 7 percent $10,000 bond for $9,400 plus $161 in accrued interest for a total outlay of $9,561. Subsequently you receive a $300 interest payment. You are in the 20 percent income tax bracket. How much tax do you owe on the interest payment? Round your answer to the nearest cent.   $

  2. You purchase a 7 percent $10,000 bond for $9,400 plus $161 in accrued interest for a total outlay of $9,561. Subsequently you receive a $300 interest payment. You are in the 20 percent income tax bracket. How much tax do you owe on the interest payment? Round your answer to the nearest cent.  $

 

3. A $2,000 bond has a coupon rate of 9 percent and matures after ten years.

 

a.What is the current price of the bond if the comparable rate of interest is 9 percent? Round your answer to the nearest cent. $ 

 

 

 

b.What is the current price of the bond if the comparable rate of interest is 9 percent? Round your answer to the nearest cent. $

 

  

 

c.What are the current yields given the prices determined in parts (a) and (b)? Round your answers to two decimal places.   a.  %                         b.  %

 

 

 

 4.     A $2,000 bond has a coupon rate of 11 percent and matures after eight years. Interest rates are currently 8 percent.

 

a.What will the price of this bond be if the interest is paid annually? Round your answer to two decimal places. $  

 

 

 

b.What will the price be if investors expect that the bond will be called with no call penalty after two years? Round your answer to two decimal places.$   

 

 

 

c.What will the price be if investors expect that the bond will be called after two years and there will be a call penalty of one year's interest? Round your answer to two decimal places. $ 

 

 

 

5.    A company has two bonds outstanding. The first matures after five years and has a coupon rate of 8.75 percent. The second matures after ten years and has a coupon rate of 8.75 percent. Interest rates are currently 9 percent. What is the present price of each $1,000 bond?. Round your answers to two decimal places.                          First bond $                                           Second bond $ 

 

6.    $1,500 zero coupon bond sells for $1,208 and matures after five years. What is the current yield and the yield to maturity? Round your answers to the nearest whole percentage.

 

The current yield  %

 

The yield to maturity  %

 

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