4. Draw a time line showing the cash flows for a bond that has a four...

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Finance

4. Draw a time line showing the cash flows fora bond that has a four year maturity, semiannual coupon payments, acoupon rate of 5 percent, and a par value of $1,000.
5. Using the information in question 4, valuethe bond under the following interest rate assumptions: a. MarketRate = 3% b. Market Rate = 5% c. Market Rate = 7%
6. Assuming the market rate is 6.5 percent,what is the value of a bond that pays an annual coupon payment, acoupon rate of 8 percent, a par value of $1,000, and a maturity of10 years. a. Is the bond in question 6 selling for a discount,premium, or par?
7. Find the yield to maturity (YTM) for a bondwith the following characteristics:
Maturity = 15 years, Coupon Rate = 10%, Coupon Payments madeAnnually, Par = $1,000. a. Bond Selling Price = $1,125 b. BondSelling Price = $1,000 c. Bond Selling Price = $975

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Solution 4Coupon interest payment done half annually i 1000 5 2 25Number of half years N 4 2 8 half yearsInvestment of 1000 will be done at start of period ie when N 0 Bond will pay 25 coupon payment at the end of each half yearand 1000 face value at the time of maturityTime line of bond cash inflows will be as below012345678100025252525252525251000Value of bond is equal to present value of its cash inflows tillmaturityBond cash inflows will be discounted at the market rate toarrive at value See Answer

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4. Draw a time line showing the cash flows fora bond that has a four year maturity, semiannual coupon payments, acoupon rate of 5 percent, and a par value of $1,000.5. Using the information in question 4, valuethe bond under the following interest rate assumptions: a. MarketRate = 3% b. Market Rate = 5% c. Market Rate = 7%6. Assuming the market rate is 6.5 percent,what is the value of a bond that pays an annual coupon payment, acoupon rate of 8 percent, a par value of $1,000, and a maturity of10 years. a. Is the bond in question 6 selling for a discount,premium, or par?7. Find the yield to maturity (YTM) for a bondwith the following characteristics:Maturity = 15 years, Coupon Rate = 10%, Coupon Payments madeAnnually, Par = $1,000. a. Bond Selling Price = $1,125 b. BondSelling Price = $1,000 c. Bond Selling Price = $975