Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. eliza mok spots two bonds in the market in which s

Eliza Mok spots two bonds in the market in which she is interested. The first bond...

90.2K

Verified Solution

Question

Finance

Eliza Mok spots two bonds in the market in which she isinterested. The first bond is a 20-year bond issued by Orange Ltdtwo years ago with a coupon rate of 4.9%. The second bond is a10-year bond issued by Pear Ltd one year ago at a coupon rate of5.1%. Both bonds have a pa r value of $1,000 and make semiannualpayments.

a. If the yield to maturity (YTM) on the Orange bond is 5.0%,what is the current bond price?

b. If the Pear bond currently sells for 102% of par value, whatis the YTM?

c. Eliza wonders why some bonds are selling at premium over parvalue while other bonds sell at discount or at par. Explain.

Answer & Explanation Solved by verified expert
4.3 Ratings (735 Votes)
ORANGE LTD BOND ParFace value 1000 Annual Coupon rate 0049 Annual coupon 49 semiannual coupon 245 Present Value Future value1rmmt r is the interest rate that is 5 m is the compounding period that is 2 mt is the time period price of the    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Eliza Mok spots two bonds in the market in which she isinterested. The first bond is a 20-year bond issued by Orange Ltdtwo years ago with a coupon rate of 4.9%. The second bond is a10-year bond issued by Pear Ltd one year ago at a coupon rate of5.1%. Both bonds have a pa r value of $1,000 and make semiannualpayments.a. If the yield to maturity (YTM) on the Orange bond is 5.0%,what is the current bond price?b. If the Pear bond currently sells for 102% of par value, whatis the YTM?c. Eliza wonders why some bonds are selling at premium over parvalue while other bonds sell at discount or at par. Explain.

Other questions asked by students

Q

A study was conducted to determine if students in different college years differ on the number...

Statistics
Q

Mg(s)+2H2O(l)→Mg(OH)2(s)+H2(g).Calculate the number of grams of Mg needed for this reaction to release enough energy to...

Chemistry
Q

List 2 examples of the seven-step research process? Step 1- define the problem Step 2- Review the...

Psychology
Q

In January 2018, Deep Sea Oil Inc. builds and begins operating an oil drilling platform in...

Accounting
Q

Find the area of this rectangle 8 m 13 m 2 m

Geometry
Q

Santa Maria Village received voter approval to issue...

Accounting
Q

The Stilton Company has the following inventory and credit purchases during the fiscal year ended...

Accounting
Q

8 Q 2 Rodriguez Company pays $310,000 for real estate plus $16,430...

Accounting
Q

Mr. And Mrs. Claus have two children. The ages of the children are 5 and...

Accounting
Q

On December 18, 2020, UNO Corporation issued 5,250 ordinary shares, par P30 for P58 per...

Accounting
Q

Northeastern University is considering replacing some Xerox copiers with faster copiers purchased from Brother. The...

Accounting
Q

The adoption of Integrated Reporting has been increasing around the world over the last decade...

Accounting