Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. bonds often pay a coupon twice a year. for the val

Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual...

60.1K

Verified Solution

Question

Finance

Bonds often pay a coupon twice a year. For the valuation ofbonds that make semiannual payments, the number of periods doubles,whereas the amount of cash flow decreases by half. Using the valuesof cash flows and number of periods, the valuation model isadjusted accordingly.

Assume that a $1,000,000 par value, semiannual coupon USTreasury note with four years to maturity has a coupon rate of 4%.The yield to maturity (YTM) of the bond is 7.70%. Using thisinformation and ignoring the other costs involved, calculate thevalue of the Treasury note:

a) $1,049,602.92

b) $874,669.10

c) $551,041.53

d) $743,468.74

Based on your calculations and understanding of semiannualcoupon bonds, complete the following statement:

When valuing a semiannual coupon bond, the time periodvariable(N) used to calculate the price of a bond reflects thenumber of periods remaining in the bond’s life.

Answer & Explanation Solved by verified expert
3.9 Ratings (585 Votes)
    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: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Imagine you are having an interview with the HR Manager of a company? And you have...

General Management
Q

Londonderry Company’s Widget Plant produces widgets for industrial use. The plant uses a standard cost system...

General Management
Q

8 1 point Mohamed purchased a car for 30000 It depreciates by 25 of its...

Basic Math
Q

Out of 100 people sampled, 10 had kids. Based on this, construct a 95% confidence...

Basic Math
Q

Explain hoe to solve. Oakmont Company has an opportunity to manufacture and...

Accounting
Q

Question Content Area Earnings per share Financial statement data for the years 20Y5...

Accounting
Q

1. What is time-driven activity based management (TDABC)? How does it differ from activity based...

Accounting
Q

The following information is available for Wildhorse Corporation: The company accountant, in preparing financial statements...

Accounting
Q

During the current year, the City of Plattsburgh recorded the following transactions related to its...

Accounting
Q

Download the Name Personal Monthly Budget workbook and rename it XLastname Personal Monthly Budget replacing...

Accounting
Q

Sometimes, corporations give their existing shareholders additional amount of the companies' own shares instead of...

Accounting
Q

Assume that in January 2020, the average house price in a particular area was $268,000....

Finance