Assumptions :
All payments occur at the end of the period unless stated otherwise.
Interest is compounded annually unless stated otherwise.
Face value of all bonds is $1000.

Starbucks has one debt issue outstanding. The debt matures on August 15, 2017, and has a 6.25% coupon. Coupons are paid semiannually. The bond is priced to yield 1.61% compound semiannually. The bond has a face value of $1000.

a. Estimate the price of the bond on February 15, 2013, immediately after that coupon is paid.

b. You buy the bond on February 15, 2013 for your estimated price from part a. You sell the bond 1 year later for $1160. What was your return? Why is it different from the original yield to maturity? Assume you collect 2 coupon payments.

Solution Preview

Please refer attached file for better understanding of formulas in MS Excel.

a)
Position at February 15, 2013
Face Value of bond=FV=$1,000
Coupon Payment=PMT=1000*6.25%/2=$31.25 Per semi annual
Number of coupon Payments ...

Solution Summary

Solution describes the steps to calculate the current price and return of the given investment. Calculations are carried out with the help of suitable built-in functions in MS Excel.

Suppose you had bought a 12% coupon bond one year ago for $1120. Thebond sells for $1085 today.
a) assuming a $1000 face value, what was your total dollar return on this investment over the past year?
b) What was your total nominal rate of return on this investment over the past year?
c) if the inflation rate last year

The XYZ's seven-year $1,000 par bonds pay 9 percent interest. Your required rate of return is 7%. Thecurrent market value for thebond is $1,100.
i. Determine the expected rate of return
ii. What is the value of thebonds to you given your required rate of return?
iii. Should you purchase thebond at thecurrent market p

Please help with the following problem. Provide step by step calculations.
You own a 20-year, $10,000 par value bond paying 7% interest annually. The market price of thebond is $875, and your required rate of return is 10%.
A) Compute thebond's expected rate of return
B) Determine the value of thebond to you, given y

Can you help me get started with this assignment?
A manufacturer has experienced a market reevaluation lately due to a number of lawsuits. The firm has a bond issue outstanding with 20 years to maturity and a coupon rate of 7% (paid annually). The required rate has now risen to 10%. The par value of thebond is $1,000.
1

1. You are considering the purchase of a 7%, 15-year bond that pays interest annually. If the yield to maturity on thebond is 6%, what price will you pay? Round your answer to the nearest cent.
2. What is thecurrent yield on thebond from part a? Round your answer to the nearest tenth

Thereturn an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in thebond's price, all , all divided by the beginning bondprice.
A. What is the holding period return on a bond with a par value of $1,000 and a coupon rate of 6 percent o

You are considering purchasing a bond at the end of this year. Thebond has a coupon rate of 10.5 percent, interest payments are made annually andthebond matures in 20 years. If your required pretax rate of return is 14 percent, what is the maximum price you would be willing to pay for a 20-year, 10.5 percent bond? Assume t

Throughout this question consider the following bond: face value of $1,000, coupon rate is 8%, semi-annual coupon payments, 4 years of maturity, and a purchase price of $1,055.69.
(a) Calculate thecurrent yield and yield to maturity on thebond as of the date of purchase.
(b) Calculate thecurrent yield andbondprice o