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Bond Valuation

Callable Bonds and Selling Bonds at Par

Bowdeen Manufacturing intends to use callable perpetual bonds. The bonds are callable at $1,250. One-year interest rates are 12%. There is a 60$ probability that long-term interest rates one year from today will be 15%. With a 40% probability, long term interest rates will be 8%. To simplify the firm's accounting, Bowdeen w

Bond price / duration

What will happen to price of a bond given the following? Yield-to-maturity = 6% Duration = 4 Interest rates rise 1% If interest rates are going to fall, which of the following would you prefer? Why? Bond A with duration = 9 Bond B with duration = 3 What is the conversion price on a bond given the follow

The return on total assets for 19x9 was closest to:

The total assets of the ABC Company on January 1, 19x9 were $2.3 million and on December 31, 19x9 were $2.5 million. Net income for 19x9 was $188,000. Dividends for 19x9 totaled $75,000, interest expenses totaled $70,000, and the tax rate was 30%. The return on total assets for 19x9 was closest to: A) 9.5%. B) 6.8%. C)

Excel - PV function

As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 7.5% on a face value of $1,000. Currently, the bonds are selling for $900. a. If your required return is 9% for bonds in this risk cla

Yield to Maturity

I am confused about purchasing a 10% bond and my broker keeps saying it has a 9% yield to maturity. Can you explain this for me?

Refund the old issue of bonds outstanding

The Robinson Corporation has $50 million of bonds outstanding that were issued at a coupon rate of 11 3/4 percent seven years ago. Interest rates have fallen to 10 3/4 percent. Mr. Brooks, the vice-president of finance, does not expect rates to fall any further. The bonds have 18 years left to maturity, and Mr. Brooks would like

Accounting/Finance Multiple Choice

1) Comprehensive financial information about a company is found in its A) Corporate by-law (B) 10-K Report (C) Article of incorporation (D) Presidential address 2) You purchase 100 shares of KLM at $40 a share by depositing the minimum amount of margin. If the initial margin requirement was 50% and the maintenance margin re

T-bills and treasury bonds

Help with this problem: With the following data- -k* real risk rate = 4% -Constant inflation premium =7% -Maturity risk premium = 1% -Default risk premium for AAA bonds =3% -Liquidity premium for long-term T-bonds =2% Assume that a highly liquid market does not exist for long-term T-bonds, and the expected r

Southeast Airlines Bonds

Southeast Airlines is considering tow alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1) Issue 60,000 shares of common stock at $45 per share (cash dividends have not been paid nor is the payment of any contemplated) 2) Issue 10% 10 year bonds at par for $2,700,000. It is e

Stock and bond markets

Stock and bond markets: a. are independent of each other as to prevailing rates of return b. offer identical returns in order to compete for the investor's dollars c. would offer identical returns if the respective investments had identical terms to maturity d. offer higher returns that tend to move up and down toget

Bond Calculations from Principal Amount

In the March of 1994, you purchased a new 25-year bond. The principal amount (i.e. maturity value) of this bond is $1,000 and it pays a coupon rate of 12%. a. If comparable bonds today (March of 2007) have a yield to maturity of 14%, what is your bond's current market price? b. If interest rates on comparable bonds are current

Bond Valuation Problems

Bond Valuation - Chapter End Problems 6.8 (Yield to Call Ex): Six years ago, The Singleton Company sold a 20 -year bond issue with a 14 percent annual coupon rate and a 9 percent call premium. Today, Singleton called the bond. The bonds originally were sold at their face value of $1,000. Compute the realized rate of r

Coupon Rate

In the bond has a face value of 1,000,000, at what price did the bond sell for that is maturing in 2007? What is the current yield for the bond maturing in 2007? See attached file for full problem description. Suppose you found the following bond quote for AT & T in the Wall Street Journal % Bond Curr Vol.

Valuing Debt & Debt Policy

THEME 1 1. Explain how changes in debt-equity ratio impact the beta of the firm's equity. Provide a mathematical example to support your analysis. 2. What are the ramifications of a firm having a "less than optimal" or "wrong" capital structure? THEME 2 1. In describing an optimal investment portfolio for someon

Journalize transactions for bonds payable and investments in bonds

Journalize the selected transactions Selected transactions completed by Hubcap Products Inc. during the fiscal year ending July 31, 2006, were as follows: a. Issued 10,000 share of $25 par common stock at $52, receiving cash. b. Issued 8,000 shares of $100 par preferred 8% stock at $125, receiving cash. c. Issued $1

Bond Maturity Practice Problem

Please include any formulas if applicable (so I can do more practice problems) How much should you pay for a $1,000 bond with 10% coupon, annual payments, and five years to maturity if the interest rate is 12%

Bonds- Rate of Return, Price at different time periods

1. Six years ago, the Singleton Company sold a 20-year bond issue with a 14 percent annual coupon rate and a 9 percent call premium. Today, Singleton called the bonds. The bonds were originally sold at their face value of $1,000. Compute the realized rate of return for investors who purchased the bond when they were issued and w

Calculate the component weight of debt based on market values.

Johnson Inc. issued $1,000, 25-year bonds 5 years ago at a coupon rate of 10% compounded semiannually. There were 3,000 bonds issued and similar bonds are now selling to yield 12% annually. Johnson does not have preferred stock and the market value of equity is $3,000,000. Calculate the component weight of debt based on market v

Stock Valuation/Annuities/Fixed Income Securities

7. Delbert Harris has just retired at age 60. His Roth retirement savings account currently has a value of $2,000,000. Delbert expects to live for thirty more years. During that time, Delbert wishes to withdraw money from his retirement account every 6 months. Delbert's financial advisor is confident that Delbert can earn a semi

Price of a bond with call provision

Zabberer Corp bonds pay coupon rate of 12% annual interest and maturity value of $1000. Bonds are scheduled to mature at end of 14 years. Company has the option to call the bonds in 8 years at a premium of 12 % above maturity value You believe company will exercise its option to call the bonds at that time. If you require a pre

Financing Expenditures, Majority Shareholders & Attractive Bonds

1. Discuss the advantages and disadvantages of financing capital expenditures through the use of internally generated cash. Cite cases where it is more effective and efficient to fund through internal funds and external funding sources; why would a financial manager choose one method over the other? 2. Find two publicly trad

Bond Yields-yield to maturity, yield to call, current yield; value of stock

1) Last year Clark company issued a 10-year ,12 % semiannual coupon bond at its par value of $1000. The bond can be called in 4 yrs at a price of $1,060, and it now sells for $1100. a. What are the bond's yield to maturity and its yield to call? Would an investor be more likely to actually earn the YTM or the YTC? b What i

Yield to Call and Yield to Maturity - Bond Problems

1) YIELD TO CALL: Six yrs ago, the Singleton Co issued 20-yr bonds with 14 percent annual coupon rate at their $1,000 par value. The bonds had a 9% call premium, with 5 yrs of call protection. Today singleton called the bonds, Compute the realized rate of return for an investor who purchased the bonds when they were issued and h

Calculating the current yield and yield to maturity

Throughout this question consider the following bond: face value of $1,000, coupon rate is 8%, semi-annual coupon payments, 4 years of maturity, and a purchase price of $1,055.69. (a) Calculate the current yield and yield to maturity on the bond as of the date of purchase. (b) Calculate the current yield and bond price o

Bond Valuation

1).An investor has two bonds in his or her portfolio, Bond C and Bond Z each matures in 4 yrs, has a face value of $1,000, and has a yield to maturity of 9.6 %. Bond C pays a 10%percent annual coupon, while Bond Z is a zero coupon bond. a. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years,