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Current value of bond and share

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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See the attached file. Thanks

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 ...

Solution Summary

This post has two queries first shows how to calculate current value of the bonds and second discusses the pricing of share

$2.19