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Bond Valuation

Multiple Choice question on investments: financial intermediary, margin, commercial banks, long position, limit order, reserves of commercial banks, specialists, term structure of interest rates, short sell, upward sloping yield curve, pension plans, Money market mutual funds, organized security markets, minimum margin requirement, federally insured investment

1. A financial intermediary transfers A. savings to households. B. savings to borrowers. C. stocks to brokers. D. new stock issues to buyers. 2. If an individual buys stock on margin and its price rises, the investor A. must put up additional collateral. B. must pay tax on the unrealized gain. C. must pay i

Bond Yield to Maturity and Price

Jones Gas Company has $1,000 par value bonds outstanding at 10 percent interest. The market price of the bond was $534.45. Your broker explained that this was due to the low par to value yield calculation of 22.3%. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is 7

Yield Maturity

You are considering purchasing some bonds to diversify your investment portfolio. You have $100,000 to invest. You notice that your local city is issuing some bonds to fund the local elementary school building. They are offering $1000 par value bonds for a rate of 6%. These bonds will mature in 20 years. They are selling cu

What is the bonds price today?

One year ago a $1000 face value 6% coupon bond was selling for $918.93. Since then, the market return decreased by two percentage points. The bond pays interest semiannually and now has four years to maturity. The bond's price today is?

Inquiry about Bonds and Stocks

Compute the cost of the following: A. A bond is selling to yield 7 percent after flotation costs, but before adjusting for the marginal corporate tax rate of 34 percent. In other words, 7 percent is the rate that equates the net proceeds from the bond with the present value of the future cash flows (principle and interest).

Bonds and Debts

Which of the following statements is most correct? A. Junk bonds typically have a lower yield to maturity relative to investment grade bonds B. A debenture is a secured bond that is backed by some or all of the firm's fixed assets. C. Subordinated debt has less default risk than senior debt D. All of the statements abo

Effective yield on Euro bonds

1. If you invest $1,000 in Euro bond for 1 yr paying 5 percent interest. At the time the investor bought the Euro bond, the exchange rate was $1.00 per Euro. a) If 1 year later you convert the maturity value of the investment in Euro to US dollars, the exchange rate was $ 1.02 per Euro, compute the effective yield in US dol

Financial Management

You own a bond that pays $100 in annual interest, with a $1000 par value.It matures in 15 years. Your required rate of return is 12 percent. a) Calculate the value of the bond. b) How does the value change if your required rate of return (1) increases to 15 percent or (2) decreases to 8 percent? c) Explain the implications


The value of a bond depends on the timing, size, and riskiness of its future cash flows. Last year S&P cut GM's rating to "Junk." What effect will this have on the value of their existing bonds? How about future bond issues? Also how do we calculate the value of a bond? How about the value of a stock? Please provide an illustrat

You have an opportunity to buy a $1,000 bond which matures in 10 years.

20. You have an opportunity to buy a $1,000 bond which matures in 10 years. The bond pays $30 every six months. The current market interest rate is 8%. What is the most you would be willing to pay for this bond? 21. Suppose a Swedish krona sells for $0.1625 and a British pound sells for $1.6523. What is the exchange ra

Bonds and Stocks - US and Euro Bonds

What are bonds? How is the value of a bond calculated? What is the yield to maturity (YTM), and how is it used in bond valuation? Compare the Eurobond to US government bonds. Discuss how they are similar and how they differ. What are common stocks? How do common stocks differ from preferred stocks? How is the value of a common


1) Consider a bond with a par value of $1,000. The coupon is paid semi-annually and the market interest rate (effective interest rate) is 10 percent. How much would you pay for the bond if: a) The coupon rate is 8% and the remaining time to maturity is 20 years? b) The coupon rate is 12% and the remaining time to maturity is

Questions Regarding Bonds and Investments

49. Your cousin Lila has a $4000 municipal bond with 3 years remaining before it matures. It has a stated interest rate of 8%. She needs cash to pay off some medical expenses so she offers to sell you the bond for $3600. If your best other investment option is a 7% account, should you buy the bond? 50. If you buy the bond

A corporation issues for cash $1,000,000 of 8%, 20 year bonds

Question A corporation issues for cash $1,000,000 of 8%, 20 year bonds, interest payable annually at a time when the market rate of interest is 7%. The straight- line method is adopted for the amortization of bond discount or premium. Which of hte following statements is true a. the carrying amount increases from its amount a

Financial Decision Makers for Managers - Stocks, Bonds, and Dividends

Complete the following problems related to Chapter 5 (Bonds, Stocks, Dividends) 5-1. The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. a. What is the bond's price today if the interest rate on comparable new

Stocks and Bonds

Why is the cost of capital most appropriately measured on an after-tax basis? What effect, if any, does this have on specific cost components

Finance Questions

1. How is valuation of any financial asset related to future cash flows? 2. Why might investors demand a lower rate of return for an investment in ExxonMobil as compared to United Airlines? 3. What are the three factors that influence the required rate of return by investors? 4. If inflationary expectations increase, what is

Equity Capital Costs

A firm has a target capital structure of 30% equity and 70% debt. The firm's tax rate is 35% and the yield to maturity on the firm's outstanding bonds is 8.2%. The firm's weighted average cost of capital is 8.76%. What's the firm's cost of equity capital?

Bond valuation at Nungesser Corp

Bond valuation Nungesser Corporation's outstanding bonds have a $1,000 par value, a 9 percent semiannual coupon, 8 years to maturity, and an 8.5 percent YTM. What is the bond's price?

Calculating the Valuation of Bonds

A bond has a $1,000 par value, 10 years to maturity, a 7 percent annual coupon, and sells for $985. a. What is its current yield? b. What is its yield to maturity (YTM)? c. Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years from today?

Bonds Current Yield

A bond that matures in 17 years sells for $932. the bond has maturity value of $1,000 and a yield to maturity of 6.17%. interest on the bond is paid semiannually. What's the bond's current yield?

Financial Management

Question 1 A bond with a coupon rate of 7.2%, matuing in 10 years at a value of $1000 and a current market price of $800, will have a yield to maturity (using the approximation formula) of between ______% and ______%. a. 10; 10.5 b. 10.5; 11 c. 11; 11.5 d. 11.5; 12 Question 7 Which of the foll

Simple Bond Question

On January 9, 2007 you buy an 8% US Treasury that matures on April 15 2012 for a price of 922.50. calculate the - accrued interest - total cost of acquiring bond - coupon yield - YTM

Computing Bond Price and Recording Issuance

Stowers Research issues bonds dated January 1, 2005, that pay interest semiannually on June 30 and December 31. The bonds have a $20,000 par value, an annual contract rate of 10%, and mature in 10 years. Required for each of the following three separate situations, (a) determine the bonds' issue price on January 1, 2005, and