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    Price per $100 face value of a two-year, zero-coupon bond

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    1. What is the price per $100 face value of a two-year, zero-coupon, risk-free bond?
    $79.63
    $98.85
    $79.36
    $89.85
    0.0605

    2. What is the price per $100 face value of a four-year, zero-coupon, risk-free bond?
    $79.63
    $98.85
    $79.36
    $89.85
    0.0605

    3. What is the risk-free interest rate for a five-year maturity?
    $79.63
    $98.85
    $79.36
    $89.85
    0.0605

    4. Suppose that General Motors Acceptance Corporation issued a bond with ten years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.
    What was the price of the bond when it was issued?
    $1,122.87
    $1,073.60
    $950.75
    $1,138.02
    $1,032.09

    5. Suppose that General Motors Acceptance Corporation issued a bond with ten years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.
    Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?
    $1,122.87
    $1,073.60
    $875.38
    $1,138.02
    $1,143.60

    6. Suppose that General Motors Acceptance Corporation issued a bond with ten years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.
    Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?
    $1,068.02
    $1,073.60
    $875.38
    $1,138.02
    $1,143.60

    7. Suppose you purchase a ten-year bond with 6% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5% when you purchase and sold the bond,
    What cash flows will you pay and receive from your investment in the bond per $100 face value?

    Ans. ______________
    Bond Sold for:
    Cash flows:

    8.Suppose you purchase a ten-year bond with 6% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5% when you purchase and sold the bond,
    What is the interest rate of return of your investment?
    4.90%
    5.00%
    6.00%
    7.00%
    11.00%

    12. Complete Chapter 9, problem 5-a on page 275. Enter your answer for the following:

    Dorpac corporation has a divident of 1.5%. Dorpac's equity cost of capital is 8%, and its dividends are expected to grow at a constant rate.
    a. what is the expected growth rate of dorpac's dividends?
    What is the expected growth rate of Dorpac's share dividends? (Points: 2)
    4.5%
    8.0%
    6.5%
    7.0%
    8.0%

    13.
    What is the expected growth rate of Dorpac's share price?
    4.5%
    8.0%
    6.5%
    7.0%
    8.0%

    14.
    Colgate-Palmolive Company has just paid an annual dividend of $0.96. Analysts are predicting an 11% per year growth rate in earnings over the next five years. After then, Colgate's earnings are expected to grow at the current industry average of 5.2% per year. If Colgate's equity cost of capital is 8.5% per year and its dividend payout ratio remains constant, what price does the dividend-discount model predict Colgate stock should sell for?
    $51.56
    $34.29
    $39.78
    $15.07
    $39.44

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    https://brainmass.com/business/bond-valuation/price-per-100-face-value-of-a-two-year-zero-coupon-bond-248872

    Solution Preview

    1. What is the price per $100 face value of a two-year, zero-coupon, risk-free bond?
    $79.63
    $98.85
    $79.36
    $89.85
    0.0605

    Taking nterest rate as 5.5% . We will apply following formulae to find out the price
    Price = Face value/(1+rate of interest)^duration
    $89.85 =Answer

    2. What is the price per $100 face value of a four-year, zero-coupon, risk-free bond?
    $79.63
    $98.85
    $79.36
    $89.85
    0.0605

    Taking nterest rate as 5.95% . We will apply following formulae to find out the price
    Price = Face value/(1+rate of interest)^duration
    $79.36 =Answer

    3. What is the risk-free interest rate for a five-year maturity?
    $79.63
    $98.85
    $79.36
    $89.85
    0.0605

    Risk -free interest rate for a five-year maturity will be:
    .0605=Answer

    4. Suppose that General Motors Acceptance Corporation issued a bond with ten years until maturity, a face value of
    $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.
    What was the price of the bond when it was issued?
    $1,122.87
    $1,073.60
    $950.75
    $1,138.02
    $1,032.09

    Price of Bond= Present Value of Inflows= 1073.60
    Present value of inflows = Present value of annualcoupons Interest received + Pv of Principal repayment

    PV of coupons= $515.21
    Here we have to find out the present value of annuity
    P=A*((1/r)-((1/(r*((1+r)^n)))
    P=present value, A= Annuity r= rate of interest n=duration
    A=70, r =6% n=10

    PV of Principal Repayment= 558
    P=present value, F= Future value r= rate of interest n=duration
    P=F/(1+r)^n

    Hence ...

    Solution Summary

    Response provides guidance to compute the price of a two-year, zero-coupon, risk-free bond

    $2.19

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