(Bond valuation? relationships) A bond of Telink Corporation pays ?$110 in annual? interest, with a ?$1,000...

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(Bond valuation? relationships) A bond of Telink Corporationpays ?$110 in annual? interest, with a ?$1,000 par value. The bondsmature in 30 years. The? market's required yield to maturity on a?comparable-risk bond is 88 percent.
a.??What is the value of the bond if the?market's required yield to maturity on a? comparable-risk bond is88 ?percent?
(Round to the nearest? cent.)
b. ?(i) What is the value of the bond if the?market's required yield to maturity on a comparable risk bondincreases to 12 ?percent??
?(Round to the nearest? cent.)
b. ?(ii)?What is the value ofthe bond if the? market's required yield to maturity on acomparable risk bond decreases to 55 ?percent?
? (Round to the nearest? cent.)
c.??The change in the value of a bond caused bychanging interest rates is called? interest-rate risk. Based on theanswers in part (b):
A decrease in interest rates? (the yield to? maturity) willcause the value of a bond to:
(increase, be unchanged, or decrease)?
By? contrast, an increase in interest rates will cause the valueto:
(increase, be unchanged, or decrease)?
Also, based on the answers in part (b)?
If the yield to maturity? (current interest?rate):
Equals the coupon interest? rate, the bond will sell at (par, adiscount, a premium)?
Exceeds the? bond's coupon? rate, the bond will sell at (par, adiscount, a premium)?
?Is less than the? bond's coupon? rate, the bond will sell at(par, a discount, a premium)?

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4.1 Ratings (782 Votes)

Value of the bond can be calculated in following manner Bond price P0 C 1 1 1YTM n YMT M 1YTM n Where M value at maturity or par value 1000 P0 the current market price of bond C coupon payment 11 of 1000 110 n time to maturity or number of payments 30 years YTM interest rate or yield to maturity 88 for similar risk bonds Now we have P0 110 1 1 188 30 88 1000 188 30 Or P0 12500 000 12500 Price of the See Answer

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(Bond valuation? relationships) A bond of Telink Corporationpays ?$110 in annual? interest, with a ?$1,000 par value. The bondsmature in 30 years. The? market's required yield to maturity on a?comparable-risk bond is 88 percent.a.??What is the value of the bond if the?market's required yield to maturity on a? comparable-risk bond is88 ?percent?(Round to the nearest? cent.)b. ?(i) What is the value of the bond if the?market's required yield to maturity on a comparable risk bondincreases to 12 ?percent???(Round to the nearest? cent.)b. ?(ii)?What is the value ofthe bond if the? market's required yield to maturity on acomparable risk bond decreases to 55 ?percent?? (Round to the nearest? cent.)c.??The change in the value of a bond caused bychanging interest rates is called? interest-rate risk. Based on theanswers in part (b):A decrease in interest rates? (the yield to? maturity) willcause the value of a bond to:(increase, be unchanged, or decrease)?By? contrast, an increase in interest rates will cause the valueto:(increase, be unchanged, or decrease)?Also, based on the answers in part (b)?If the yield to maturity? (current interest?rate):Equals the coupon interest? rate, the bond will sell at (par, adiscount, a premium)?Exceeds the? bond's coupon? rate, the bond will sell at (par, adiscount, a premium)??Is less than the? bond's coupon? rate, the bond will sell at(par, a discount, a premium)?