Chapter 10 1. What is a bond? A security that obligates the issuer to make specified payments to the holder over a period of time. 2. What is a coupon rate? A bond’s annual interest payment per dollar of par value. The annual payment equals the coupon rate times the bond’s par value. The coupon rate‚ maturity date‚ and par value of the bond are part of the bond indenture‚ which is the contract between the issuer and the bondholder. 3. What is a maturity value (a/k/a par and maturity) The payment
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textbook 7-1. Determine the interest payment for the following three bonds: 3 ½ percent coupon corporate bond (paid semiannually)‚ 4.25 percent coupon Treasury note‚ and a corporate zero coupon bond maturing in ten years. (Assume a $1000 par value.) 3 ½ percent coupon corporate bond (paid semi-annually): ½ × 3.5% × $1‚000 = $17.50 4.25 percent coupon Treasury note: ½ × 4.25% × $1‚000 = $21.25 corporate zero coupon bond maturing in 10 years: 0% × $1‚000 = $0 7-3. A bond issued by Ford on May
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Question 1 . 2 out of 2 points Your bank account pays a 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? Answer Selected Answer: The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%. Correct Answer: The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%. . Question 2 . 2 out of 2 points Which of the following statements regarding a 15-year (180-month)
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4. What is the cash flow of a 10-year bond that pays coupon interest semiannually‚ has a coupon rate of 7%‚ and has a par value of $100‚000? The principal or par value of a bond is the amount that the issuer agrees to repay the bondholder at the maturity date. The coupon rate multiplied by the principal of the bond provides the dollar amount of the coupon (or annual amount of the interest payment). A 10-year bond with a 7% annual coupon rate and a principal of $100‚000 will pay semiannual interest
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Bonds will only be issued at face value if the rate demanded by bond holders (the market rate) is the same as the rate shown on the bonds (called the coupon rate). You should remember that‚ regardless of what the bond holder pay for the bond‚ the will receive the face value on maturity; and the interest payment the bond holder receive will be the coupon rate on the bond multiplied by the face value (regardless of the price paid for the bond). In other words‚ the amount the bond holders receive on
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he or she will notice different kinds of shoppers wandering around the aisles. These shoppers’ types can be narrowed down to three main types. Those three types include: the unorganized and unprepared shoppers‚ the shopping list shoppers‚ and the coupon freaks. First of all‚ there are the unorganized and unprepared shoppers. These types of customers usually go to the supermarket whenever they feel the need to. They don’t prepare a list or prepare their mind overall before going. Instead‚ they walk
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customer used the promotional coupon) as well as the number of purchases made using the various forms of payment mentioned within the data table. As the Case Problem introduction stated‚ there were 100 sales included in the data set‚ using four different methods of payment‚ to assess the use and productivity of the promotional coupon. Pelican Stores sent out a promotional coupon to boost sales and gain a new customer base‚ relying on the assumption that the promotional coupon will draw in those people
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couponing. When I first started what I would do was take coupons from the Sunday’s paper cut the ones I know my mom could use. So when we go grocery shopping I’ll hold on to the coupons until we went to check out hand them to the
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bond) payments • If the price of a coupon bond = its principal (or FV)‚ then YTM = the bond’s coupon rate (C/FV) – If bond price exceeds its face value‚ YTM < coupon rate Week # 2 January 28‚ 2014 3 Yields on U.S. Treasury Bonds‚ 2003-2012: Short-Term Yields (but not Prices) Varied More Week # 2 January 28‚ 2014 4 Bond Yields Differ from Returns‚ in Concept and in the Data • Returns (over some time span) = current yield (via coupon) plus percentage change in the bond’s
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price of a 10-year‚ zero coupon bond paying $1‚000 at maturity if the YTM is: BASIC (Questions 1– 12) a. 5 percent? b. 10 percent? c. 15 percent? 2. Valuing Bonds Microhard has issued a bond with the following characteristics: Par: $1‚000 Time to maturity: 25 years Coupon rate: 7 percent Semiannual payments Calculate the price of this bond if the YTM is: a. 7 percent b. 9 percent c. 5 percent 3. Bond Yields Watters Umbrella Corp. issued 12-year bonds 2 years ago at a coupon rate of 7.8 percent. The
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