91Ó°ÊÓ

Find the price which should be paid for a zero coupon bond which matures for \(\$ 1000\) in 10 years to yield: a) \(10 \%\) effective. b) \(9 \%\) effective. c) Thus, a \(10 \%\) reduction in the yield rate causes the price to increase by what percentage?

A 10 -year accumulation bond with an initial par value of \(\$ 1000\) earns interest of \(8 \%\) compounded semiannually. Find the price to yield an investor \(10 \%\) effective.

Two \(\$ 100\) par value bonds both with \(8 \%\) coupon rates payable semiannually are currently selling at par. Bond A matures in 5 years at par, while Bond B matures in 10 years at par. If prevailing market rates of interest suddenly go to \(10 \%\) convertible semiannually, find the percentage change in the price of: a) Bond A. b) Bond B. c) Justify from general reasoning the relative magnitude of the answers to ( \(a\) ) and \((b)\).

A \(\$ 1000\) par value \(n\) -year bond maturing at par with \(\$ 100\) annual coupons is purchased for \(\$ 1110 .\) If \(K=450,\) find the base amount \(G\).

An investor owns a \(\$ 1000\) par value \(10 \%\) bond with semiannual coupons. The bond will mature at par at the end of 10 years. The investor decides that an 8 -year bond would be preferable. Current yield rates are \(7 \%\) convertible semiannually. The investor uses the proceeds from the sale of the \(10 \%\) bond to purchase a \(6 \%\) bond with semiannual coupons, maturing at par at the end of 8 years. Find the par value of the 8 -year bond.

An \(n\) -year \(\$ 1000\) par value bond matures at par and has a coupon rate of \(12 \%\) convertible semiannually. It is bought at a price to yield \(10 \%\) convertible.

A \(\$ 10,000\) serial bond is to be redeemed in \(\$ 500\) installments of principal at the end of the 6 th through the 25th years from the date of issue. Interest at the rate of \(6 \%\) is paid annually on the balance outstanding. What is the price to yield an investor \(10 \%\) effective?

Find the price of a \(\$ 1000\) par value 10 -year bond maturing at par which has coupons at \(8 \%\) per annum payable quarterly and is bought to yield \(6 \%\) per annum convertible semiannually.