Explore BrainMass

# Bond Valuation

### Financial Management questions (present value of a bond, price of a bond, value of an investment, and more...)

************ 1. A 20-year bond pays 12% on a face value of \$1,000. If similar bonds are currently yielding 9%, What is the present value of the bond? (Use annual analysis, based on 20 yrs-- and a decrease in the inflation premium as shown.) Answer over \$1,000 under \$1,000 over \$1,200 \$1,000 2. If the inflat

### Ten year bond sells for \$1195, pays 11%: What is its approximate yield to maturity?

A ten-year bond pays 11% interest on a \$1000 face value annually. If it currently sells for \$1,195, what is its approximate yield to maturity? (Show all work/calculations/formulas)

### Purchase Price, Expected Coupon Equivalent - Commercial Page

A commercial paper note with \$1 million par value and maturing in 60 days has an expected discount return (DR) at maturity of 6 percent. What was its purchase price? What is this note's expected coupon-equivalent (investment return) yield (IR)? DR = (Par value - Purchase price) / Par value X 360 / Days

### Calculating the Value of a Bond: Two Year Maturity

A bond which has 2 years to maturity has a coupon of 5% and a face value of \$100,000. Where coupons are paid semi-annually and the investors required return is 6%pa. What will be the IN value of this bond for investors?

### Finance: Optimal capital structure, yield to maturity, bonds, market risk, call provision

311. A taxpaying, levered firm's optimal capital structure: is 100 percent equity financing. consists of equal amounts of debt and equity financing. is the mixture of debt and equity financing that minimizes the firm's aftertax cost of debt. is the mixture of debt and equity financing that

### 4 Finance problems......annual dollar coupon amount, purchasing treasury notes, and more...

1. Government Note Rate: 2.875 Maturity: Nov10n Bid: 99:02 Asked: 99.03 CHG: -2 ASK YLD: 3.55 A. What annual dollar coupon amount will investors receive if face value of the Treasure note is \$1,000? B. What price would you pay in dollars to purchase this Treasure note? 2. T-bill Maturity: June 16, 2

### Applying approximate yield to maturity

Question to work: a. Bonds issued by West Motel Chain have a par value of \$1000, are selling for #1,100, and have 20 years remaining to maturity. The annual interest payment is 13.5% (\$135). Compute the approximate yield to maturity. Use formula as follows: Approximate yield to maturity (Y') = Annual interest payment

### Bonds / Ytm/ HPR

On November 1, 2009 you purchased two callable bonds with 6 years remaining to maturity at the time of purchase and 3 years to remaining to call. The coupon interest rate of both bonds is 10% and par value is \$1,000. The first bond pays annual coupon and the second - semi-annual. At the time you purchased the bond, the annual-co

### Journalize bond interest; amortize bond discount

Company Balance Sheet as of December 31, 2009. Current liabilities Bond interest payable \$168,000 Long-term liabilities Bonds payable, 7% due January 1, 2020 \$2,400,000 Less: Discount on bonds payable

### 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?

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 rat

### Managerial Finance: Coleman Technologies Inc.

See the attached file. Coleman Technologies Inc. Cost of capital Coleman Technologies is considering a major expansion program that has been proposed by the company's information technology group. Before proceeding with the expansion, the company must estimate its cost of capital. Assume that you are an assistant to Jerry Le

### Calculate bond value today

Two-years ago, Trans-Atlantic Airlines sold a \$250 million bond issue to finance the purchase of new jet airliners. These bonds were issued in \$1000 denominations with an original maturity of 12 years and a coupon rate of 12%. Determine the value today of one of these bonds to an investor who requires a 14% rate of return on the

### Capital, risk, profit, pension planning and maturity

See attached file with 15 problems. 1. A firm wants to expand its business and to do so it must issue new capital (debt, common stock, or preferred stock) since its internal cash flow is not sufficient to pay for the expansion. The firm wants to issue the cheapest type of capital. Given the following information, what type of

### Currency

Problem 23-2 A Treasury bond futures contract has a settlement price of 89'08. What is the implied annual yield? Problem 17-5 Suppose that 1 Swiss Franc could be purchased in the foreign exchange market for 60 U.S. cents today. If the franc appreciated 10% tomorrow against the dollar, how many francs would a dollar buy

### Bonds

On March 1, 2005, Matt purchased \$63,000 of Lawson Co.'s 8%, 20-year bonds at face value. Lawson Co. has paid the annual interest due on the bonds regularly. On March 1, 2010, market interest rates had risen to 12%, and Matt is considering selling the bonds. Required: Using the present value table in in the attachments b

### Corporate Finance

1.Baron Inc. bonds have a face value of \$1000 and mature in 10 years. The coupon rate is 18%, and coupons are paid semiannually. The yield is 12% compound semiannually. Find the bond's price. 2. Danish Inc. has cumulative preferred stock that pays an annual dividend of \$4.50. If the current price is \$37.50, what is the r

### Current yield/yield to maturity

Apple has 8% coupon bonds on the market with 18 years to maturity. The bonds make semiannual payments and currently sell for 93% of par, or \$930. Compute: 1. The Current Yield 2. The Yield to Maturity What is the difference between these two?

### Finance Exam Practice Problems

1) After-Tax Cost of Debt LL Incorporated's currently outstanding 11 percent coupon bonds have a yield to maturity of 14 percent. LL believes it could issue at par new bonds that would provide a similar yield to maturity. If its marginal tax rate is 40 percent, what is LL's after-tax cost of debt? Round your answer to two decim

### Will the bond prices be the same? Will they remain at the current level until maturity?

3 \$1,000 face value, 10 yr, noncallable bonds, same risk, YTM's are equal. Bond 8 has an 8% annual coupon Bond 10 has a 10% annual coupon Bond 12 has a 12% annual coupon Bond 10 sells at par. If interest rates are constant for next 10 years, does it make sense that they should all have the same price and the bond prices

### Finance:Cost of capital, Capital budgeting and Bonds.

I need step by step calculations using EXCEL functions showing how these 7 problems would be solved. The answers to each problem is at the end of the attachment. Please use EXCEL functions/formulas to show how each problem can be solved and a brief explanation of what the answers mean. That will help me to greatly understa

### Managing Debt for Different Companies

1. Delaware Steel Company has \$100 million of 13 percent debentures outstanding. The indenture (loan covenants) limits additional borrowing such that the total interest coverage (EBIT/interest) is at least three times. Delaware's EBIT last year was \$52 million. How much could Delaware borrow under a term loan at 13 percent inter

### Bond Entries Accounting

3. On January 1, Porter Corporation issued \$600,000, 6%, 5-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Prepare journal entries to record the (a) Issuance of the bonds. (b) Payment of interest on July 1, assuming no previous accrual of interest. (c) Accrual of interest on December 31.

### After-Tax Cost of Debt; Project's NPV; Ethier's shareholders financial risk

See attached file. Problem 9-2, "After-Tax Cost of Debt" from Chapter 9, page 371. Explain how cost of capital financing techniques affects the organization. Problem 10-1, "NPV" from Chapter 10, page 414. Explain how to use capital budgeting and relevant cash flow to compare investment alternatives. Problem 15-3, "Premium

### Calculating the Lowest Price for a Day

A corn futures contract closed yesterday at a price of \$2.42 a bushel. The maximum daily price range is \$0.20 and the daily price limit is \$0.10. Therefore, the minimum change in the price today is \$0.10 a bushel. Highest closing price for today is \$2.62 a bushel. Lowest closing price for today is \$2.32 a bushel. The mos

### Bond with 5 year maturity with face value \$100

Suppose a bond with 5 year maturity with face value \$100 and 8% coupon rate which is equal to the current bank interest rate what is the corresponding cash flow (sequence) generated by this 5 year coupon If the bond issuer decided to increase their discount rate to 9.2% what is the current price (present value) for this bond.

1. Debt guarantees are: never disclosed in the financial statements. considered to be a contingent liability. a bad business practice. recorded as a liability even though it is highly unlikely that the original debtor will default. 2. When a bond sells at a premium, the: contract rate is above the

### Current Bond Price

Grossnickle Corporation issued 20-year, non callable, 7.8% annual coupon bonds at their par value of \$1,000 one year ago. Today the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?

### Yield to Maturity for a Bond

You are a bond-buyer for the brokerage firm Wecan-Barely-Ketchum, and you have three separate parties interested in purchasing bonds from your available portfolio selection. Group 1 requires a minimum 15% yield. Group 2 has said that they are out for a quick killing and will settle for no less than 8%, but do not require more th

### Select any publicly traded bond. Provide the following inf

Select any publicly traded bond. Provide the following information: Item Data Data Source Coupon Rate and frequency Price Maturity Date Rating (Optional) Quoted Yield to Maturity Confirm the yield to maturity on the bond. Response shows how to find publicly traded bonds and do this for any bond.

### Financial Mathematics: Bond Valuation

This morning IBM issued a five year \$100,000 face value bond paying yearly interest with a 5% coupon rate. This afternoon interest rates jumped to 6%. What will the bond now sell for?