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Bond Valuation

Bond Value for Fishbone Corporation

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.

Bond price journal entries

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

Finance Stock Investing and Risk Required Rate of Return

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

20 multiple choice questions about bonds, stocks and options

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

Warranty and coupon computation

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

Basic Finance class

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

Bond valuation, YTM, Constant growth model, realized return, required return

A1. (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond's coupon rate is 7.4%. What is the fair value of this bond? A5. (Yield to maturity) New Jersey Lighting has a 7% coupon bond maturing in 17 years. The current market price of the bond is $975. What is the

Zero-coupon Bond

A zero-coupon bond pays no interest and simply pays principal amount at maturity. A 20-year, $1,000 principal amount, zero-coupon bond is currently priced at $258.40. What is the effective annual interest rate?

Finance: 12 Year, 5% Coupon Bond

Today is January 1. Starting today, Sam is going to contribute $140 on the first of each month to his retirement account. His employer contributes an additional 50% of the amount contributed by Sam. If both Sam and his employer continue to do this and Sam can earn a monthly rate of ½ of 1 percent, how much will he have in his r

Analyze financial statements for Better Mouse Trap; Treasury Bond valuation

See the attached file. Only question 1 (a-d) question 6 (a-d) a. What is the company's average annual rate of sales growth from 2006 through 2008? b. How long, on average, was Better Mouse Trap taking to collect on its receivable accounts in 2008? (Assume all of the company's sales were on credit.) c. Was Better Mo

Financial questions relating to Business Organization, Shareholders' wealth, Cash flow statement, financial ratios, time value of money, CAPM, Bonds, payback, NPV, IRR, IOS and MCC schedule, WACC, Leverage, EBIT-EPS approach, Cash Conversion cycle.

1) Explain the three principal forms of business organization. Outline their respective advantages and disadvantages. How do taxes, risk, scale, and ownership liquidity affect the selection of one of these three methods? 2) Compare the shareholder-wealth-maximization model with the corporate-wealth- maximization m

BOND - yield to maturity, Beta of Stock

Problem 1: James Smith, CFA, has developed the following data on stock X and the market: Return on the market 10% Covariance between the return on stock X and the return on the market 0.03 Correlation coefficient of the return on stock X and the return on the market 0.7 Standard deviation of the return on stock X 0.18 Sta

FINANCE PROBLEMS

Ace, Inc. has just paid a $2.00 annual dividend on its common stock. The dividend is expected to grow at a constant rate of 8 percent per year indefinitely. Based on market risk conditions and Ace's beta value, the required rate of return on Ace's stock is 16 percent. What is the current value of Ace's stock? A $1000 face val

Compute bond prices; prepare journal entries for stock and bond transactions

On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest each June 30 and December 31. On the issue date, the market rate of interest is 6%. Compute the price of the bonds on their issue date. The following information is taken from present value tables: Presen

Risk and Return Finance

1. Suppose the expected return and variance of the market portfolio are 0.15 and 0.002 respectively. If the riskless return is 0.055, what will be the required return on a stock whose return variance is 0.12 and correlation with the market portfolioâ??s return is 0.6? 2. PAB Inc. is evaluating whether to invest in a

Qn 9

All treasury securities has a yield to maturity of 7%-- so the yield curve is flat. If the yield to maturity 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 coupo

Permanent assets financing

Permanent assets financing Bingo Corporation is determining whether to support $150,000 of its permanent current assets with a bank note or a short-term bond. The firm's bank offers a two-year note where the firm will receive $150,000 and repay $175,000 at the end of two years. The firm has the option to renew the loan at marke

Qn 3

Bond value - semiannual payment Assume that you wish to purchase a 25-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $45. If you require a 7 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Assume your instructor has two bonds in his portfolio

Assume your instructor has two bonds in his portfolio. Both have face values of $1,000 and pay a 10% annual coupon rate. Bond L (longer maturity) matures in 15 years and Bond S (shorter maturity) matures in 1 year What will the value of each bond be if the market interest rate for similar rated and maturing bonds is 5%, 8

Weighted Average Cost of Debt for Dell (7 Bonds)

Go to www.finra.org/marketdata, enter Dell as the company and find the yield to maturity for each of Dell's bonds. What is the weighted average cost of debt for Dell using the book value weights and the market value weights? There are 7 bonds.

Yield to Maturity

A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,050, and currently sell at a price of $1,100. What are their nominal yield to maturity and their nominal yield to call? What return should investors expect to earn on these bonds? Please show all work.

Bonds: What is the realized yield on your investment?

Suppose you buy a 7% coupon bond today for $960. The bond has a face value of $1,000, and has 18 years until maturity, and pays interest semi-annually. You hold the bond for five (5) years and then you decide to sell it. When you sell the bond the YTM has increased by 100 basis points (1%). What is the realized yield on

Bonds

Compute the market price of a bond. Banzai Corporation is issuing $200,000 of 8%, 5 year bonds when potential bond investors want a return of 10%. Interest is payaing semiannually. (The bonds are selling at a discount). For an example, refer to Chapter 15, page 668. An example of the computations you need to make are shown in

Bond Yields, Interest Rates and Bond Prices

Which statement is most correct: a. if a bonds yield to maturity exceeds its annual coupon, then the bond will be trading at a premium b. if interest rates increase the relative b, price change of a 10 year coupon bond will be greater than the relative price change of a 10 year zero bond c. if a coupon bond is selling at pa

Estimating a Firm's WACC with Relevant Assumptions

1. Capital Budgeting (45 pts) A proposal to invest in new white table wine-making equipment has been developed. The following information is now provided: 1. Equipment cost (installed) is $2 million 2. Revenues of $1M, $1.2M, 1.3 and $1.4M/yr for each of the next four years. 3. Satyr consulting generated the f

Fair Value of a Coupon Paying Bond

A corporation is planning to sell $5M worth (face value) of 10 year bonds to finance a major expansion. They intend to sell 2,500 bonds with a face value of $2,000. They will give 10% interest (of the face value of the bonds) payable annually at the end of each of the 10 years. At the end of 10 years, in addition to the interest

Sinking funds and Bond Questions

Can you please provide the answer along with the explanition and/or calculations? 6. Sinking fund cash would be classified on the balance sheet at: current asset fixed asset intangible asset investment 13. Sinking fund cash would be classified as a current asset? True or False 14. A corp issued $100,000, 13%, 10