Студопедия
Случайная страница | ТОМ-1 | ТОМ-2 | ТОМ-3
АвтомобилиАстрономияБиологияГеографияДом и садДругие языкиДругоеИнформатика
ИсторияКультураЛитератураЛогикаМатематикаМедицинаМеталлургияМеханика
ОбразованиеОхрана трудаПедагогикаПолитикаПравоПсихологияРелигияРиторика
СоциологияСпортСтроительствоТехнологияТуризмФизикаФилософияФинансы
ХимияЧерчениеЭкологияЭкономикаЭлектроника

Solution to Integrative problem

Читайте также:
  1. Andy Rooney is a television commentator who usually talks about the pleasures and problems of everyday life. Here he tells us about a teacher that he liked very much.
  2. Ar/39Ar isotopic age of Svyatoy Nos Peninsula (Transbaikalia) granulites and problem of its geodynamic interpretation
  3. Britons attitude to the problem of migration
  4. C. Is radical feminism to blame for any social problems (e.g. increasing
  5. Categorical Gene Models and the Problem of Small Effect Size
  6. Compare the problems in the U.S.A. and the U.K.
  7. CONFERENCE ON POLLUTION PROBLEMS

 

1. Young Corp. Bond Value (Vb) =

 

® ANSWER -$1,132.48

 

Thomas Resorts Bond Value (Vb) =

 

75.00

® ANSWER -$871.85

 


Entertainment, Inc. Bond Value (Vb) =

 

79.75

® ANSWER -$999.17

 

2. Young Corporation: $1,030 =

1,030

® ANSWER 7.37%

 

Thomas Resorts: $973 =

75.00

® ANSWER 7.79%

 


Entertainment, Inc.: $1,035 =

1,035

79.75

® ANSWER 6.94%

 

3. i. Young Corp. Bond Value (Vb) =

 

® ANSWER - $922.99

 

(Vb) =

 

75.00

® ANSWER - $679.62

 

Entertainment, Inc. Bond Value (Vb) =

 

79.75

® ANSWER - $906.15

 

3. ii Young Corp. Bond Value (Vb) =

 

® ANSWER - $1,409.45

 

(Vb) =

75.00

® ANSWER - $1,157.16

 

Entertainment, Inc. Bond Value (Vb) =

 

79.75

® ANSWER - $1,105.49

 

 

4. As the interest rates rise and fall, we see the different effects on the bond prices depending on the length of time to maturity and whether the investor's required rate of return is above or below the coupon interest rate. If the investor’s required rate of return is above the coupon interest rate, the bond will sell at a discount (below par value), but if the investor’s required rate of return is below the coupon interest rate, the bond will sell at a price above its par value (premium).

 


5. Duration of bonds

 

  Young Corp. Thomas Resorts Entertainment, Inc.
Bond Value $1,030.00   $ 973.00   $1,035.00
Required rate of return 6%   9%   8%
Year Ct t* PV(Ct) Ct t* PV(Ct) Ct t* PV(Ct)
  $ 78.00 $ 73.58 $ 75.00 $ 68.81 $ 79.75 $ 73.84
  78.00 138.84 75.00 126.25 79.75 136.75
  78.00 196.47 75.00 173.74 79.75 189.92
  78.00 247.13 75.00 212.53 1,079.75 3,174.59
  78.00 291.43 75.00 243.72    
  78.00 329.92 75.00 268.32    
  78.00 363.12 75.00 287.19    
  78.00 391.51 75.00 301.12    
  78.00 415.51 75.00 310.79    
  1,078.00 6,019.50 75.00 316.81    
      75.00 319.71    
      75.00 319.98    
      75.00 318.02    
      75.00 314.21    
      75.00 308.86    
      75.00 302.24    
      1,075.00 4222.86    
             
Sum of t*PV(Ct) 8,467.02   8,415.17   3,575.11
             
Duration 8.22   8.65   3.45
       
                     

The value of the Entertainment, Inc. bonds will be less sensitive to interest rate changes than will Young Corporation and Thomas Resorts bonds.

6. Although the Young Corporation bonds and the Thomas Resorts bonds have different terms to maturity, the duration of the two bonds is very similar. These two bonds will likely have similar sensitivity to changes in interest rates as evidenced by their duration values.

7. The Entertainment, Inc. and Thomas Resorts bonds have lower expected rates of return than your required rate of return. Young Corporation’s expected rate of return is greater than your required rate of return. So we would buy Young Corporation and not Entertainment, Inc. or Thomas Resorts.


Solutions to Problem Set B

 

7-1B. Value (Vb) =

 

® ANSWER -698.87

 

7-2B. If the interest is paid semiannually:

Value (Vb) =

 

4.5

® ANSWER -1068.92

 

If interest is paid annually:

Value (Vb) =

 

® ANSWER -1068.05


7-3B. $950 =

 

® ANSWER 4.96%

 

The rate is equivalent to 9.92 percent annual rate, compounded semiannually or 10.17 percent (1.04962- 1) compounded annually.

7-4B. $975 =

 

® ANSWER 10.30%

 

7-5B. $1,175 =

 

 

® ANSWER 6.18%

 


7-6B. a. $1,100 =

 

 

® ANSWER 7.80%

 

b. Vb =

 

® ANSWER -926.33

 

c. Since the expected rate of return, 7.80 percent, is less than your required rate of return of 10 percent, the bond is not an acceptable investment. This fact is also evident because the market price, $1,100, exceeds the value of the security to the investor of $926.33.

 

7-7B.

a. Value

Par Value $1,000.00

Coupon $ 80.00

Required Rate of Return 7%

Years to Maturity 20

Market Value $ 1,105.94

 

b. Value at Alternative Rates of Return

Required Rate of Return 10%

Market Value $ 829.73

 

Required Rate of Return 6%

Market Value $1,229.40

 

c. As required rates of return change, the price of the bond changes, which is the result of "interest-rate risk." Thus, the greater the investor's required rate of return, the greater will be his/her discount on the bond. Conversely, the less his/her required rate of return is below that of the coupon rate, the greater the premium will be.

d. Value at Alternative Maturity Dates

Years to Maturity 10

Required Rate of Return 10%

Market Value $ 877.11

Required Rate of Return 6%

Market Value $1,147.20

e. The longer the maturity of the bond, the greater the interest-rate risk the investor is exposed to, resulting in greater premiums and discounts.

 

7-8B. $1,110 =

 

® ANSWER 5.83%

 

7-9B. (a) Value (Vb) = +

 

8.5

® ANSWER -867.62

 


(b) (i) Value (Vb) = +

 

® ANSWER -698.05

 

(b) (ii) Value (Vb) = +

 

® ANSWER -1,104.77

 

(c) We see that value is inversely related to the investor's required rate of return.

 

7-10B.

Value Bond A

Par Value $1,000.00

Coupon $ 90.00

Required Rate of Return 7%

Years to Maturity 5

Market Value $ 1,082.00

 

Value Bond B

Par Value $1,000.00

Coupon $ 60.00

Required Rate of Return 7%

Years to Maturity 5

Market Value $ 959.00

 


Value Bond C

Par Value $1,000.00

Coupon $ 120.00

Required Rate of Return 7%

Years to Maturity 10

Market Value $ 1,351.18

 

Value Bond D

Par Value $1,000.00

Coupon $ 90.00

Required Rate of Return 7%

Years to Maturity 15

Market Value $ 1,182.16

 

Value Bond E

Par Value $1,000.00

Coupon $ 75.00

Required Rate of Return 7%

Years to Maturity 15

Market Value $ 1,045.54


Дата добавления: 2015-10-30; просмотров: 129 | Нарушение авторских прав


Читайте в этой же книге: Джеральдина Чаплин: истории из кино и жизни написаны на её лице. | CHAPTER OUTLINE | END-OF-CHAPTER QUESTIONS | END-OF-CHAPTER PROBLEMS | SOLUTION TO INTEGRATIVE PROBLEM | CHAPTER OUTLINE | END-OF-CHAPTER QUESTIONS | CHAPTER OUTLINE | END-OF-CHAPTER QUESTIONS | Solutions to Problem Set A |
<== предыдущая страница | следующая страница ==>
END-OF-CHAPTER PROBLEMS| Bond A B C D E

mybiblioteka.su - 2015-2024 год. (0.021 сек.)