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
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
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
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
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
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
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
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
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 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?
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?
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?
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
Calculate Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current Assets: $30 million Fixed Assets: $50 million Total Assets: $80 million Current Liabilities: $10 million Long-Term Debt: $30 million Common Equity: Common Stock (1 million shares): $1 million Retained Earnings: $39 million Total claims: $80 million The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 10%, the same as the rate on new bank loans. The long-term debt consists of 30,000 bonds, each of which has a par value of $1,000, carries an annual coupon interest rate of 6%, and matures in 20 years. The going rate of interest on new long-term debt, rd, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the firm's market value capital structure.
Suppose the Schoof Company has this book value balance sheet: Current Assets: $30 million Fixed Assets: $50 million Total Assets: $80 million Current Liabilities: $10 million Long-Term Debt: $30 million Common Equity: Common Stock (1 million shares): $1 million Retained Earnings: $39 million Total claims: $
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
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
Bond Returns, Rate of Return, Constant-Growth Model, Dividends and Taxes, Dividends and Repurchases, Sustainable Growth, Percentage of Sales
Question One: Bond Returns. You buy an 8 percent coupon, 20-year maturity bond when its yield to maturity is 9 percent. A year later, the yield to maturity is 10 percent. What is your rate of return over the year? Question Two: Rate of Return. A bond that pays coupons annually is issued with a coupon rate of 4 percent, matur
On Jan 1, the Cheng Corp purchased $10,000 of 5%, five-year bonds as a long term investment. Interest is paid annually. The company is not involved in active trading of securities. A. Record the purchase of the bonds for $10,000. B. Record the receipt of the first interest payment on the bonds in part A. C. Assuming the com
Use the code letters listed below (a - l) to indicate, for each balance sheet item (1 - 13) listed below the usual valuation reported on the balance sheet. 1. Common stock 2. Prepaid expenses 3. Natural resources 4. Property, plant, and equipment 5. Trade accounts receivable 6. Copyrights 7. Merchandise invento
1) A six-month $10,000 Treasury bill is selling for $9,844. What is the annual yield according to the discount method? Does this yield understate or over-state the true annual yield? Explain 2) What is the current taxable equivalent yield for an individual in the 35% federal income tax bracket for intermediate bonds (10 or
Having difficultly journalizing entry to amortize bond premium, interest payment and redemption of bonds.
Given the current $1,000 price of each bond, what is each bond's duration? Given each bond's duration, what is the forecasted change in the value of the bonds? If the rate on comparable bonds 6 %, what are the price and duration of each bond? Based on the duration of each bond, which portfolio is riskier?
1) You owe the following $1,000 bonds: Bond A 4% coupon due in three yrs Bond B 5% coupon due in 5 yrs Bond C 7% coupon due in 10 yrs Currently the structure of yields is positive so that each bond sells for its par value. However, you expect that inflation
Duration of a coupon paying bond is: Equal to its number of payments. Less than a zero coupon bond. Equal to the zero coupon bond. Equal to its maturity. None of the above.
It is January 2007 This company is under some pressure and has a strict capital budget of $20 million, so they need to be careful as to which projects they choose. Examine the following book-value balance sheet for Fairfield Office supplies for the year 2006. What is the capital structure of the firm based on market values?
A company's $500 million of 30-year bonds outstanding was issued at a coupon rate of 8%. On 5/1/03, two years after issuance, the market rate for bonds of similar characteristics falls to 5%. What should be the market price of the company's bonds on the bond market at 5/1/03? a. 66.85 b. 100 c. 144.69 d. 146.12
A publicity trade bond has a par value of $5 million and 10 years to maturity. It is current priced at 102, its YTM is 5.24 % and its coupon is 5.50%. What semi-annual interest payment can bondholders expected to received? Options: ? 131,000 ? 137,500 ? 262,000 ? 275,000 ? 280,000 The boding is trading at Option
49. What is the yield to maturity, to the nearest percent, for the following bond: current price is $908, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity? (a) 11 percent (b) 12 percent (c) 13 percent (d) 14 percent 50. What is the current price of a $1,000 par value bond matur
Question: Margaret Kimberly, CFO of Charles River Associates, is considering whether or not to refinance the two currently outstanding corporate bonds of the firm. The first one is an 8 % perpetual bond with a $1000 face value with $75 million outstanding. The second one is a 9% perpetual bond with the same face value with $87.5