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Bond Valuation

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,

book-value balance sheet for University Products, Inc

Examine the following book-value balance sheet for University Products, Inc. What is the capital structure of the firm based on market value? The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are one million common shares outstanding. BOOK VALUE BALANCE SHEET

Find value factor on coupon rate

With a 10% discount rate, the present value factors of $1 received at the end of each of the next three years are 0.909 and 0.751, respectively. Given these values, the present value of a $1,000 (par) 3-year corporate bond with an 8% coupon rate is?

Finance Problems

4. In a world in which your investment choices consist of a risky portfolio and a risk-free asset, the expected return on the former is 15%, and the return on the latter is 10% (which is also your borrowing rate). The standard deviation of the return on the risky portfolio is 20%. If your complete portfolio has a standard deviat

Present value of cash flow / retained earnings

34.. Given the following information, calculate Retained Earnings for 2004. Dividend Payout Ration = 40% 2004 Net Income = $5,150 2003 Retained Earnings = $12,800 35. Firms should finance long-term assets with short-term financing and short-term assets with long-term financing. TRUE FALSE 36. Calcula


I purchased a $25,000 bond @ 104 as a long term investment on January 1, 2007. The bond pays interest annually on each Dec 31 and matures Dec 31, 2009. Assuming a straight line amortization, what is net amount of cash received from this investment over its life? How much cash is collected each year? How much premium will be

Bond Yields

A Sprint bond has 5 years until maturity a coupon rate of 8 percent, and sell for 2,000. a. What is the current yield on the bond? b. What is the yield to maturity?

Risk/Return, Yield Curve, Interest and Inflation Rates

4. Risk and return Your uncle would like to restrict his interest rate risk and his default risk, but he would still like to invest in corporate bonds. Which of the possible bonds listed below best satisfies your uncle's criteria? AAA bond with 10 years to maturity. BBB perpetual bond. BBB bond wit

Bond Prices and years to maturity: The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. If the required rate of return on bonds is 10%, what is the current price of: a) the bonds with 3 years to maturity?

The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest semi-annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return on bonds is 10%, what is the current price of: a) the bonds wi

Expected Return and Standard Deviation of Return of Stock Portfolio

The probability that the economy will contract is 0.2. The probability of moderate growth is 0.6, and the probability of a rapid expansion is 0.2. If the economy contracts, you can expect a return on your portfolio of 5 percent. With moderate growth, your return will be 8 percent. If there is a rapid expansion, your portfolio wi

Bond Questions

For all the following multiple choice questions use the following information: ABC Co. issued a bond some time ago with a coupon rate of 10%. The market interest rate was then 11%. The bond is not due to mature for some time. The current market interest rate is 9%. (Your answer must be supported by a concise explanation.)

Finance Questions

1.You expect to retire in 15 years. Based on your projections, you believe you can afford to put away $1,000 per month over that time. How much will you have at retirement? After retirement you expect to live for another 20 years, if you already had $200,000 in your account when you started putting away the $1,000 per month,

Bonds, Short-Term and Long-Term Interest Rates and Volatility

(6-2) The values of outstanding bonds change whenever the going rate of interest changes. In general, short term interest rates are more volatile than long term interest rate. Therefore, short term bond prices are more sensitive to interest rate changes than are long term bond prices. Is this statement true or false? Explain.

Stock and Bond Valuation, Time Value of Money -Present Value, Future Value, WACC

1. Valuing a bond and valuing a stock: a. Bond valuation-what is the PV or the appropriate selling price of a 30 year bond which has a 10% coupon, paid annually, and has a 10 years till maturity, during a time when market interest rates are 5% b. Using the dividend discount model determine the appropriate market price for a


My company has a bond outstanding with a par value of $1000, an annual interest payment of $110, a market price of $1200 and a maturity in 10 years. Determine the following: a. Coupon rate b. Current yield c. Approximate yield to maturity

Yield to Maturity of Bonds

My company's bonds are currently selling for $1,157.75 per $1,000 par-value bond. The bonds have a 10% coupon rate and will mature in 10 years. What is the approximate yield to maturity of the bonds?