0
present value zero coupon=1000/(1.08)31
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How do bondholders get a return on zero coupon bonds?
Zero coupon bonds do not pay interest and are therefore sold at a steep discount to face value depending on the maturity date of the bond. Due to the time value of money, the discount on a 30 year zero coupon bond will be much greater than on a 10 year zero coupon bond. At maturity bondholders will receive the full face value of the bond which provides bondholders a return. For example, a 30 year zero coupon bond with a face value of $1,000 and sold for $500 would return a $500 profit after 30 years. Holders of zero coupon bonds can sell the bonds at any time before maturity. If an investor bought zero coupon bonds prior to a steep drop in interest rates, the value of the zero coupon bonds would increase and could be sold at a profit.
Yest Corporation's bonds have a 15 year maturity a 7 percent semiannual coupon and a par value of 1000?
$10008.65
The interest rate on a bond is called?
The interest payment is called the "coupon" and it is usually a fixed amount per year, which is set when the bond is issued. But when you buy a bond on the market for a price that is different from the original face value, the effective interest rate is called the "yield". The reasons why the yield might be different from the coupon rate are described in the related link called Bond yields and coupon.
If the yield curve is downward sloping what is the ytm on a 10 year Treasury coupon bond relative to that on a 1 year T-bond?
If the yield curve is downward sloping, the yield to maturity on a 10-year Treasury coupon bond relative to that on a 1 year T-bond is the yield on the 10 year bond. It will be less than the yield on a 1-year bond.Ê
A 6-year Circular File bond pays interest of 80 annually and sells for 950 What are its coupon rate current yield and yield to maturity?
Bond Pricing. A 6 year circular file bond pays interest of $80 annually, and sells for $950. What are its coupon rate, Current yield, and yield maturity?
A 1000 par value 12-year bond with a 9 percent coupon rate recently sold for 980 What is the yield maturity rate?
9.28
How do you calculate a bond value that has a ten-year maturity a 12 percent coupon rate with annual payments and a 1000 par value?
You would need to know a Yield To Maturity to answer this question.
How do bondholders get a return on zero coupon bonds?
Zero coupon bonds do not pay interest and are therefore sold at a steep discount to face value depending on the maturity date of the bond. Due to the time value of money, the discount on a 30 year zero coupon bond will be much greater than on a 10 year zero coupon bond. At maturity bondholders will receive the full face value of the bond which provides bondholders a return. For example, a 30 year zero coupon bond with a face value of $1,000 and sold for $500 would return a $500 profit after 30 years. Holders of zero coupon bonds can sell the bonds at any time before maturity. If an investor bought zero coupon bonds prior to a steep drop in interest rates, the value of the zero coupon bonds would increase and could be sold at a profit.
Yest Corporation's bonds have a 15 year maturity a 7 percent semiannual coupon and a par value of 1000?
$10008.65
Where does the interest on a 4 year zero coupon go?
It goes to the investor who buys the bond. A zero coupon bond is a bond in which, the investor need not pay any premium (coupon) above the face value of the bond while purchasing it. Let us say a company issues a $10,000 bond at a discount of 10% with zero coupon, it is enough if the investor pays $9000 to buy the bond. At the time of maturity he would get back $10,000. This 10% discount can be compared to the interest earned on the investment for the investor.
The interest rate on a bond is called?
The interest payment is called the "coupon" and it is usually a fixed amount per year, which is set when the bond is issued. But when you buy a bond on the market for a price that is different from the original face value, the effective interest rate is called the "yield". The reasons why the yield might be different from the coupon rate are described in the related link called Bond yields and coupon.
If the yield curve is downward sloping what is the ytm on a 10 year Treasury coupon bond relative to that on a 1 year T-bond?
If the yield curve is downward sloping, the yield to maturity on a 10-year Treasury coupon bond relative to that on a 1 year T-bond is the yield on the 10 year bond. It will be less than the yield on a 1-year bond.Ê
What is the present value of a 30 year 100 dollar bond which provides fixed semiannual interest payments when the effective rate is 12 percent and the bonds stated rate is 7 percent?
Coupon payment = (100)(.035) = 3.5 PV coupon payments payments = $56.56 PV of bond = 3.34 Present value of bond = 56.56 + 3.34 = $59.90
A ten-year bond pays 11 percent interest on a 1000 face value annually If it currently sells for 1195 what is its approximate yield to maturity?
A ten-year bond pays 11 % interest on a $1000 face value annually. If it currently sells for $1,195, what is its approximate yield to maturity
What is book yield?
The "book yield" is a measure of a bond's recurring realized investment income that combines both the bond's coupon return plus its amortization. It is defined as the bond's Internal Rate of Return (IRR) of all its cash flows. The following example illustrates the concept of book yield. A $100 par bond having a 5% coupon to be paid annually at year end is purchased for a $95 purchase price at the beginning of the year. The bond is set to mature in three years. In this example, the book yield will be greater than the 5% coupon on the discount bond as the investor will receive both the 5% coupon and the difference between purchase price and maturity value (an additional $5). The book yield at purchase will be 6.90%, which is the internal rate of return or IRR of the cash flows. The $5 discount is amortized into income over the life of the bond and the book value of the bond is increased until it reaches its par value of $100 at maturity.
What is the taxation of zero coupon bonds held to maturity?
Zero coupon bonds issued by the US Treasury are issued at a discount to face value. An investor holding zero coupon bonds is paid the full face value when the zero coupon bond matures. The difference between the purchase price and the maturity value is know as the original issue discount which represents the interest earned on the zero coupon bond. Although a zero coupon bond does not pay annual interest, an investor must pay taxes each year based on the imputed receipt of income. Since the investor is not receiving interest payments during the life of the bond, taxes would be paid on interest income not actually received until bond maturity. Due to the yearly tax liability on imputed interest, it makes sense for most investors to hold zero coupon bonds in a tax deferred retirement account. The interest earned on zero coupon bonds issued by the US Treasury are exempt from state and local taxes.
11 Leggio Corporation issued 20-year 7 annual coupon bonds at their par value of 1000 one year ago Today the market interest rate on these bonds has dropped to 6 What is the new price of the bonds giv?
1,111.50 (Annual coupon)
