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Bond Valuation

Financial Analysis

1 Calculate the NPV and the IRR for the following project and state whether or not you would accept the new project. Required rate of return = 9% Current prime rate = 11% Initial outflow = $75,000 Inflows = $25,000 for years 1-3

Bond prices and yields

5.17 bond sold for $1,065.12. the bond life is 9 years, yeild to maturity is 7 percent, what is the coupon rate? my answers 6.0 5.18 a. several years ago bonds were issued at face value yeild to maturity of 7 percent. with 8 years left until maturity company hits hard times. yield to maturity increases to 15%. what happ

Various external financing alternatives

Provide a DETAILED presentation of the characteristics of the various EXTERNAL financing alternatives, including the advantages and disadvantages of each. Include a recommendation of which alternative (or combination of alternatives) should be used to finance the investment. Thanks for getting me started!!

Pre-tax cost of debt

Wilson's Cabinet has bonds outstanding that mature in eight years, have a 6 percent coupon and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,020. What is the company's pre-tax cost of debt?


(See attached file for full problem description) --- 37. Amortizing Loan. Consider a 4-year amortizing loan. You borrow $1,000 initially, and repay it in four equal annual year-end payments. If the interest rate is 8 percent, show that the annual payment is $301.92 Fill in the following table, which shows how much of

Zero coupon bonds: Calculate issue price and interest expense for The Ledge

Zero coupon bonds pay no interest. The only cash investors receive is the lump-sum principle payment at maturity. On January 1, 2005 The Ledge Inc. issued $250 million of zero coupon bonds at a market yield rate of 12%. The bonds mature in 20 years. Required 1. What was the January 1, 2005 issue price of these zero cou

Bonds and yields

Q1. An 8 percent annual coupon, noncallable bond has ten years until it matures and a yield to maturity of 9.1 percent. What should be the price of a 10-year noncallable bond of equal risk which pays an 8 percent semiannual coupon? Assume both bonds have a par value of $1,000. Q2. Oakdale Furniture Inc. has a beta coefficie


Midland Oil has $1,000 par value bonds outstanding at 11 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is: a) 6 percent b) 8 percent c) 12 percent Harrison Ford Aoto Company has a $1,000 par value bond outstanding that pays 11

Exam Study Question

A 1-year Corporate bond is issued with a face value of $100,000, paying interest of $2,500 semi-annually. If market yields decrease shortly after the T-bond is issued, what happens to the bond's: Price Coupon Rate Yield to Maturity

Castle in the Sands, Inc.

A. Several years ago, Castles in the Sand, Inc., issued bonds at face value at a yield to maturity of 7 percent. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond? B. Suppos

Continuous Compounding, Portfolio Duration, CBOT bond futures contract, Swap

Problem 1 The 6-month, 12-month, 18-month, and 24-month zero rates are 4%, 4.5%, 4.75%, and 5%, with semi-annual compounding. (a) What are the rates with continuous compounding? (b) What is the forward rate for the 6-month period beginning in 18 months? (c) What is the value of an FRA that promises to pay 6% (compounded sem

Portfolio Management

1. What is the correlation coefficient? 2. What is the amount to put in the bond fund to achieve the minimum variance portfolio? 3. What is the expected return, variance, and standard deviation on this portfolio? 4. What is the slope of a line going from Rf through this portfolio? 5. What is the utility of this portfolio? 6

Practice Problems

1. Market-determined required rate of return is the same thing as discount rate, according to the text. a. True b. False 2. When the market interest rate exceeds the coupon rate, bonds sell for less than face value. a. True b. False 3. The yield to maturity is defined as the discount rate that makes the present value o

Corporate bonds

A 10-year corporate bond is issued with a face value of $100,000, paying interest of $2,500. semi-annually. If market yields decrease shortly after the T-bond is issued, what happens to the bond's: a. price? b. coupon rate? c. yield to maturity?

Bond values

A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar debt obligations are now 8 percent. a. What is the current price of the bond? b. Assume Ms. Russell bought the bond three years ago, when it had a price of $1,070. W

Bond valuation: Yield to maturity, Yield to call

Company A issued zero coupon bonds 5 years ago at a price of $200 per bond. The bond has a par value of $1000 and a 20 year maturity when they were isued. The bonds were callable 10 years after the issue date at a price 7 percent over their accrued value on the call date. If the bonds sell for $225 in the market today what is t

A level coupon bond:

A level coupon bond: A) is typically a debenture. B) has the same rate as its yield to maturity. C) is an annuity over the life of the bond. D) is a zero coupon annuity. E) C) and D).

Bond's yield

True or False If a bond's yield does not change over its life, then the size of the discount or premium will increase as its life shortens.


(See attached file for full problem description with data table) --- Using the table above solve the following: a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 5-year, a 15-year, and a 30-year time

Calculation of the yield to maturity for bonds

I'm trying to understand a formula in a CPA review book for the calculation of the yield to maturity for bonds. The formula is as follows: YM = Annual interest payment + Principal Payment -Bond Price / Number of years to maturity / 0.6 (Price of bond) + 0.4 (Principal payment) The factors 0.6 and 0.4 are some type of

Bond Value : Solution set

$1,000 par value bond outstanding that pays 9 percent annual interest. The current yield to maturity on such bonds in the market is 12 percent. Compute the price of the bonds for these maturity dates: 30 years 15 years 1 year

Determining whether a bond is overpriced

Please help with the following problem. Cost of a bond: His broker quoted a price of $1,180. Jim is concerned that the bond might be overpriced based on the facts involved. The $1,000 par value bond pays 14 percent interest, and it has 25 years remaining until maturity. The current yield to maturity on similar bonds is 1

Security Analysis in Practice

You have been asked to give a speech about "Security Analysis in Practice" to a group of industry professionals. In your speech you are to address the following: 1. The most common theoretical underpinnings of the models used by practitioners, and 2. The types of practical adjustments financial analysts might consider i


If the company were to issue 10-year bonds with a face value of $100,000 and the market rate of interest is 10%, what would the proceeds from the sale if the bonds were zero-interest bonds? What would be the proceeds if the annual interest payments did not begin for 5 years and the stated rate of interest were 10%? What

Pure Bond Value, Conversion Value Etc.

13.) Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $930. The par value is $1,000, the coupon rate is 8 percent, and the bond matures in 25 years. The conversion price is $50 and the company's common stock is selling for $44 per share. Interest is paid semiannually. a. What is the c

Finance Scenario's 3

7.) Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 9 percent and interest is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 15 years to maturity. Compute the price of the bonds based on semiannua

Cost problems

2.) Sullivan Cement Company can issue debt yielding 13 percent. The company is paying a 36 percent rate. What is the after-tax cost of debt? 6.) Addison Glass Company has a $1,000 par value bond outstanding with 25 years to maturity. The bond carries an annual interest payment of $88 and is currently selling for $925. Addison