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Bond Valuation

Yield to Maturity (YTM)

Suppose the yield to maturity (YTM) drops by 1% on two equivalent risk bonds with 13% coupons. Which bond will see a larger change in its price: the one-year to maturity bond OR the five year to maturity bond? a) The one year to maturity bond's price will change more b) The five year to maturity bond's price will change more

Calculate the annual interest payment on a bond.

A 5 year treasury bond with a coupon rate of 8% has a face value of $1000 and a yield to maturity of 7%. What is the bonds annual interest payment? a) $10 b) $40 c) $80 d) $100 e) $140 f) The annual interest payment cannot be determined because the current market price of the bond is not provided.

Endicott Publishing: Possible refunding current bond issue; calculate effects

Mike Garcia, the chief financial officer of Endicott Publishing Co., could hardly believe the change in interest rates that had taken place over the last few months. The interest rate on A2 rated bonds was now 8%. The $30 million, 15 year bond issue that his firm has outstanding was initially issued at 11% five years ago.

Harold Reese must choose between two bonds; compute yields

Harold Reese must choose between two bonds: Bond X pays $95 annual interest and has a market value of $900. It has 10 years to maturity. Bond Z pays $95 annual interest and has a market value of $920. It has two years to maturity. a. Compute the current yield on both bonds. b. Which bond should he select based on yo

Dave & Marlene Coates Bond Investment: a short term trade or a swap

Dave and Marlene Coates live in the Boston Area, where Dave has a successful orthodontics practice. They have built up a sizable investment portfolio and have always had a major portion of their investment portfolio and have always had a major portion of their investments in fixed-income securities. They adhere to a fairly aggre

Convertible Bonds from Investors

An investor is considering the purchase of an 8%, 18-year corporate bond that's being priced to yield 10%. She thinks that in a year, this same bond will be prices in the market to yield 9%. Using annual compounding, find the price of the bond today and in 1 year. Next, find the holding period return on this investment, assuming

Bond

D. What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required return is 10%? e. (1) What is the value of a 13%coupon coupon bond that is otherwise identical to the bond described in Part d? Would you now have a discount or a premium bond? (2) What is the value of a 7% coupon bond with these

Calculate Yield to maturity (YTM) and Yield to Call (YTC)

B7. (Yield to maturity) Coca-Cola has a zero-coupon bond that will pay $1,000 at maturity in five years. Today the bond is selling for $790.09. What is the YTM? B8. (Yield to maturity) J.C. Penney has a zero-coupon bond that will pay $1,000 at maturity in 25 years. Today the bond is selling for $98.24. What is its Y

Calculates gain and loss based on spot price and future price

3) You manufacture gold jewellery for sale to local retail outlets. This upcoming spring you will require 500 troy ounces of gold and you would like to hedge your risk of price fluctuations through NYMEX. Today's (June) price of gold is US $393 per ounce. The settle price on a futures contract to buy gold in April is US $403

Valuation & Rates of Return

There is an attachment with 15 short problems attached. Please review the problems and assist with solutions as described. Must use Excel financial functions when possible. There is more than 1 tab. Thanks

Calculate cost of equity capital: David Ortiz Motors

David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity on the 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?

Compute: The Weighted Average Cost of Capital

I need help figuring this out. The Accidental Petroleum Company is trying to determine its weighted average cost of capital for use in making a number of investment decisions. The firm's bonds were issued 6 years ago and have 14 years left until maturity. They carried an 8% coupon rate, and are currently selling for $962.50.

Valuation

A firm generated free cash flow of $1 million last year and expects it to grow at a constant rate of 8 percent indefinitely. The company's weighted average cost of capital is 10 percent. a. Calculate the company's free cash flow for next year. b. Calculate the value of the company's operations. c. How much would the va

Comprehensive, Issurance, Classification and Reporting Problem

Presented below are four independent situations: a.) On March 1, 2008, Heide Co. issued at 103 plus accrued interest $3,000,000, 9% bons. The bonds are dated January 1, 2008, and pay interest semiannually on July 1 and January 1. In addition, Heide co. incurred $27,000 of bond issuance costs. Compute the net

YTM and YTC of a Bond

1. Luther Industries has just issued a callable (at 102) ten-year, 8% coupon bond with semi-annual coupon payments. The bond can be called at 102 in three years or anytime thereafter on a coupon payment date. It has a current price of 99. a. What is the Yield to Maturity (YTM) on this bond? b. What is the Yield to Call (YT

Consol Bonds

Perpetual Life Corp. has issued consol bonds with coupon payments of $60. If the required rate of return on these bonds at the time they were issued was 6 percent, at what price were they sold to the public? If the required return today is 10 percent, at what price do the consols sell?

Bingham Corporation and Debt

Bingham Corporation has a new issue of Debt it wishes to value. Using the following information, calculate the following: Annual Interest = 12 percent Price of Bond = $96 Principle Pmt = $55 Years to Maturity = 9 Calculate the Approximate Yield to Maturity. Is this Bond a good issue for the company? Investor? Why?

Bonds, price, financial manager, debt, PV

Question 6: Which of the following statements is CORRECT? A One disadvantage of zero coupon bonds is that the issuing firm cannot realize any tax savings from the debt until the bonds mature. B Other things held constant, a callable bond should have a lower yield to maturity than a noncallable bond. C Once a firm declar

What is the bond's yield to maturity?

You just purchased a bond that matures in 5 years. The bond has a face value of $1000 and has an 8% annual coupon. The bond has a current yield of 8.21%. What is the bond's yield to maturity?

Questions

Dear OTA, Please assist with the following questions. Thanks 1. Suppose the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Risk Premium Industrial production (I) 7% Interest rates ( R) 3 Consumer confidence ( C) 5 The return on a par

Bond Value: Example Problem

You have the opportunity to buy a $1,000 bond which matures in 10 yrs. The bond pays 13% interest annually and you will receive interest payments every six months. The current yield is 10%. What is the most you would be willing to pay for this bond presently?

Wicker Corporation permanent asset financing: Calculate loan vs coupone bonds

Permanent assets financing Wicker Corporation is determining whether to support $100,000 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 $100,000 and repay $118,810 at the end of two years. The firm has the option to renew the loan at ma

Maximizing Profit: Semiannual Interest Payments

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?

Taxation: MC Question with explanation needed:

Which of the following statements is most correct and explain why? a. Indexing tax brackets reduces the extent of "bracket creep." b. Bonds issued by a municipality such as the city of Miami would carry a lower interest rate than bonds with the same risk and maturity issued by a private corporation such as Florida Power & L

Bond value: What is the maximum price you would pay for this bond?

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% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?