Current value of bond and share
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1. A large grocery chain is reevaluating its bonds since it is planning to issue a new bond in the current market. The firm's outstanding bond issue has 6 years remaining until maturity. The bonds were issued with a 6 percent coupon rate (paid semiannually) and a par value of $1,000. Because of increased risk the required rate is 10 percent. What is the current value of these bonds?
2. In 2004, Venus Fly Co. issued a $75 par value preferred stock which pays $5.25 annual dividend. Due to changes in the overall economy and in the company's financial condition investors are now requiring a 5 percent return. What price would you be willing to pay for a share of the preferred if you receive your first dividend one year from now?
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Solution Summary
This post has two queries first shows how to calculate current value of the bonds and second discusses the pricing of share
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VALUATION OF A BOND
A large grocery chain is reevaluating its bonds since it is planning to issue a new bond in the current market. The firm's outstanding bond issue has 6 years remaining until maturity. The bonds were ...
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