# Q4A(1) - QUIZ 4 NAME 1 Assume that David Bowie has issued...

This preview shows pages 1–3. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: QUIZ 4 NAME: 1. Assume that David Bowie has issued Bonds that have 7 years left till maturity and carry a coupon rate of 8% paid semi-annually. He has used his albums as a collateral (for those of you not familiar with David Bowie — he is a 705 British rocker who had hits such as Ziggy stardust and space oddity). The current market price is \$850. Assume the required rate to be 10%. (In 1997 Bowie really used his albums as a ‘collateral’ to issue Bonds with a total Face value of \$55 million which were bought primarily by the Prudential Insurance company — someone normally not associated with rock stars). Draw the time line for these Bowie Bonds. __ ) 17 o l L Y) ’ 3.332%5—0 4‘0 4'0 4’0 \ 1. Find the Yield to Maturity r] v ww>v V 7’ ,9... _ i + “El,” 1 1) ’L I 0+? D” l 000 r W : 40 F ’i 2—— I T“ i O Hqu OH L25-57 grimly-‘1 2. What is the return you ‘should’ get on these Bonds? :ERR: “37° I WM" 3. What is the return you ‘would’ get? 4. What is the price of these Bonds? :i'Sys’O Qatva 5. What is the Value of these Bonds? : :12.” -— ‘ W owe/21 (H043 L’ ﬁme 6. By how much are the Bonds over/under priced? *1 \$ ‘91 wcgaﬁu‘uapt 19‘} iqoi‘m‘ gm 3 Si‘oi. II. This is a different question. Assume that the Bonds of a company have 6% coupon rate, the market price is \$1100, and the time till maturity is 2 years. Further assume that the market is in equilibrium. 3 _ ~ . 1. Find the yield—to-maturity. ~ / P , V 0AM Q Pv; LEW 4—.— +7“: ‘6” (00‘ 0+ 0" (ii—2’3“? E M, 4...}. +100 0, "'17 (I + '0 (1+2?) 2‘ 2. Is the Bond Under/Over/ Correctly priced? Cear'redﬁa PHLU‘L ,5 (19/0 : 3. Is the Bond trading at Discount/Par/Premium? R) 7 PM . \H ‘3 ,Y, .p 3,. III. If the coupon rate is the same as the Opportunity Cost of Investing in the Bond, What does this imply? Wm Valwt ofﬂﬁ 130n1£=5h0©0 IV. If the bond is trading at par, what is the Capital Gains Yield? V. Provide the following current numbers 1. PrimeRate .. a 3 ' 2/5” 1 2. Rate of Unemployment b 7 (a 3. Inﬂation rate \ I ‘ ,L ...
View Full Document

{[ snackBarMessage ]}

### Page1 / 3

Q4A(1) - QUIZ 4 NAME 1 Assume that David Bowie has issued...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online