Company has bonds maturing in 6 years and pays 6% interest semiannually on a $1000 face value. a) If required rate of return is 10%, what is the value of the bond? b) How would answer change change if interest rate was paid annually
Calculate the convexity of the ABC bond Company Maturity (years) Coupon (%) Price Yiled to Maturity (%) ABC 4 10 98 10.63 DEG 8 9 87 11.53 GHI 22 11 102 10.76 JKL 28 10 90 11.17 Suppose market interest rates change by 50 basis points. Estimate the new price of the ABC
Laurel company has assets of $2 million and long-term, 10% debt of $1,200,000. Hardy Company has assets of $2 million and no long-term debt. The annual operating income (before interest) of both companies is $400,000. Ignore taxes. 1. Compute the rate of return on a. assets b. stockholder equity. 2. Evaluate the relative m
1. Assume a $4,000 investment and the following cash flows for two alternatives. Year Investment X Investment Y 1 $1,000 $1,300 2 800 2,800 3 700 100 4 1,900 5 2,000 a. Under the payback met
You are contemplating buying a 4 3/4% coupon bond that makes semi-annual interest payments. The bond matures in 10 years and the yield-to-maturity currently is 4.18%. How much are you willing to pay for a face value of $1,000,000 of this bond? In addition, how much do you stand to gain or lose if YTM goes up by 0.25%?
Ricks Roofing Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 6%, based on semiannual compounding. What is the price of this bond?
Jim's Tire Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the risk-free long-term government bonds are currently yielding 7.8%, then at what rate should Jim's Tire expect to issue new bonds?
Jim's Tire Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the risk-free long-term government bonds are curre
A company issued 10-year, 9% bonds with a par value of $500,000 when the market rate was 10%. How do I calculate the first semi-annual interest payment and the amortization of any bond discount or premium?
Problems: Number 1: (Bond valuation) A $1,000 face value bond has a remaining maturity of 8 years and a required return of 7%. The bond's coupon rate is 8%. What is the fair value of this bond? Number 2 (Yield to maturity) Smith In
I am trying to graph the yield curve for U. S. Treasury bonds. I believe I saw it on MSN Money I'm not sure. I am also trying to graph the yield curve for AAA, AA, & A rated corporate bonds. Also why is the corporate bonds yield curve different than the U. S Treasury yield curve?
1. An investment offers a 13 percent total return over the coming year. Jim Kelly thinks the total real return on this investment will be only 7 percent. What does Jim believe the inflation rate will be over the next year? Interpreting Bond Yields Suppose you buy a 7 percent coupon, 20 year bond today when it's first issued.
During the year Shor Company issued several series of bonds. For each bond, record the journal entry that must be made upon the issuance date (Round to the nearest dollar; a calculator is needed for 2 and 3. 1. On March 15, a 20-year, $5000 par value bond series with annual interest of 9 percent was issued. Three thousand of
The Brownstone Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. a.) What is the yield to maturity at a current market price of $829?
All treasury securiities has a yield to maturity of 7%-- so the yield curve is flat. If the yield to maturiy on all Treasuries were to decline to 6%, which of the following bonds would have the largest percentage increase in price and why? A. 15 year zero coupon Treasury bond. B. 12 year Treasury bond with a 10% annual
Assume that you wish to purchase a 10-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $50. If you require a 10 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Southern Fried Foods has a $12 million bond issue outstanding with a coupon rate of 6.75 percent and a yield-to-maturity of 7.27 percent. What is the present value of the tax shield if the tax rate is 35 percent?
Micro Spinoffs, Inc., issued 20-year debt one year ago at par value carrying a coupon rate of 8 percent (payable annually). Today, the debt is selling at $1,050. If the firm's tax bracket is 35 percent, what is the after-tax cost of debt for Micro Spinoffs?
All of the following are characteristics of bonds except a. in terms of priority, bonds are senior to both common stock and preferred stock. b. bonds have a stated maturity. c. the payments on bonds are compulsory. d. bonds are senior to common stock and junior to preferred stock. e. bond holders are creditors but not own
Suppose the current Treasury bond futures contract has a quoted price of 89-09. The terms of the contract are standard (20 years, 6% coupon paid semiannually). The implied annual interest rate on the contract is a. about 6 percent. b. about 12 percent. c. about 7.0 percent. d. about 14 percent. e. In fact, none of the an
The Garland Corporation has a $1,000 par value bond outstanding with a $90 annual interest payment, a market price of $820 and a maturity date in five years. Find the following: a. The coupon rate. b. The current yield. c. The approximate yield to maturity. Thanks for your help!
1. You deposit $1,000 today in a savings account that pays 3.5% interest, compounded annually. How much will your account be worth at the end of 25 years? $2,245.08 $2,363.24 $2,481.41 $2,605.48 $2,735.75 2. A security analyst obtained the following information from Prestopino Products' financial statemen
1. Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Related information for 2009 is as follows ($ in millions): Customer advances balances, Dec. 31, 2008 $110 Advances received with 2009 orders $195 Advances applicable to
David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity is the on company's outstanding bonds is 9%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 9.96%. What is the company's cost of equity capital?
On January 1, 2010, Fishbone Corporation purchased 300 of the $1,000 face value, 9%, 10-year bond of Walters Inc. The bonds mature on January 1, 2020, and pay interest annually beginning January 1, 2011. Fishbone purchased the bond to yield 11%. How much did Fishbone pay for the bond.
Please explain the steps to find the amounts. KD's Cowboy Bar and Grill Ltd. is a country and western style restaurant and club chain based in Red Deer, Alberta, that specializes in barbecue food and country music. On January 1, 2008, it issued $250,000 face value five-year, semi-annual bonds to provide capital to expand the
1. How can it be possible to invest in two stocks and have less risk than if you invested all your money in only one of them? 2. Explain why a foreign investment project might have a lower required return than an otherwise-identical domestic project. 3. What is the relationship between interest rates and bond prices? Whe
Question 1 Moerdyk Corporation's bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 4.75%, based on semiannual compounding. What is the bond's price? $1063.09 $1090.35 $1118.31 $1146.27 $1174.93 Question 2
Schmitt Company must make computations and adjusting entries for the following independent situations at December 31, 2011. 1. Its line of amplifiers carries a 3 year warranty against defects. On the basis of past experience the estimated warranty costs related to dollar sales are: first year after sale-2% of sales; second ye
True or false questions. 1. If interest rates rise after a bond is issued, the yield to maturity will exceed the current yield. 2. Equipment trust certificates issued by a firm are safer than its debentures. 3. Income bonds are the safest bonds issued by a firm. 4. A period payment to retire a debit is illustrative of a si
Consider the Leverage Unlimited, Inc., zero coupon bonds of 2008. The bonds were issued in 1990 for $100. Determine the yield to maturity
1. Consider the Leverage Unlimited, Inc., zero coupon bonds of 2008. The bonds were issued in 1990 for $100. Determine the yield to maturity (to the nearest 1/10 of 1 percent) if the bonds are purchased at the... a. Issue price in 1990. (Note: To avoid a fractional year holding period, assume that the issue and maturity dates