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Bond Valuation

Percentage Change in Bond Prices

A 16-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?

Calculate the risk-adjusted asset base for a bank under

1. Calculate the risk-adjusted asset base for a bank under the following: a. Cash of $20 million, 0% b. General Obligation municipal security of $100 million, 20% c. Singe family home mortgages of $500 million, 50% d. Commercial loans of $300 million, 100%. - If the bank has no off-balance sheet activity what is the banks

Par Value vs. Face Value of Bonds

If you looked at the bond trading pages online or in the newspaper and saw a bond price quote for a $1,000 par value bond of "96.500" you would know the actual dollar price of the bond was:

Taxable Equivalent Yield Concept

Beth Anaheim is a 70-year-old retiree who has been referred to ACG by a current ACG client. Beth's main investment objectives are safety of principal and current income. Her retirement income sources include social security, rental income from a commercial investment property managed by a professional property management firm, a

Understanding Municipal Bonds

What are municipal bonds? We are comparing the equivalent tax-free rate of two investments: 1) A taxable corporate bond that is at a rate of 10%, with a marginal tax of 30%, and 2) A tax-free municipal bond that is at a rate of 8%. Which of the two investments offers a better return considering the tax impact?

Kroger coupon program: decision of uncertainty

Research statistical data within a business context that requires a decision to be made. Then, use probability on your researched data to formulate a decision. Explain your research methods and process for limiting the uncertainty within the decision. Discuss your results in an in-depth narrative. Be sure to explain the follo

Valuation: Zero-Coupon, Convertible, and Corporate Bonds

1. Valuation - zero-coupon bond A U.S. Government bond with a face amount of $10,000 with 8 years to maturity is yielding 3.5%. What is the current selling price? 2. Valuation - convertible bond You purchased one of AAA Corp.'s 9%, 15-year convertible bonds at its $1,000 par value a year ago when the company's common sto

Calculating Final Payoffs

See the attached file. You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. However, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be

Preferred Stock Valuation - Convertible Bonds

1. Answer the questions given the following information concerning a convertible bond: Principle: $1,000 Coupon: 5% Maturity: 15 years Call price: $1,050 Conversion Price: $37 (i.e. 27 shares) Market price of common stock: $32 Market price of the bond: $1,040 A. What is the current yield of this bond? B. What is th

Importance of Bonds Yields & Prices Over Time & Their Valuations

Please provide an excel spread sheet answer with calculations. Question: A company with the name "Unique Motors Company" sells an issue of bonds on the first of January, 2001. These bonds are purchased at $960 per unit (i.e., the bonds had been issued at 96 percent of par), have an even 12 percent coupon rate payable semi

Semiannual coupon bond valuation

Semiannual coupon bond valuation 1. Hartnett Computing has 8 year, non-callable, 8.8% semiannual coupon bonds outstanding. The bonds have a par value of $1,000 and a nominal YTM of 9.5%. What is the bond's current market price? a. $994.48 b. $961.38 c. $1,049.65 d. $1,038.62 e. $950.35 2. Suppose a sinking fund pr

Portfolio Questions

Attached is an excel sheet on a portfolio. What is the current yield on the equities portfolio? a. 2.02 b. 2.03 c. 2.06 d. 2.86 CY = annual income / price I tabulated Annual Inc/Share = 5.145 I then divided by the price of all equities = 69.9. 5.145/69.9 = .073 - Way off of the list of answers. Please advise. Do I nee

Bond Yields, Bond Prices, and Discounted Cash Flows

1-Bond Yields: Night Hawk Co. issued 15-year bonds two years ago at a coupon rate of 9.4 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM? 2-Bond Prices: App Store Co. issued 15-year bonds one year ago at a coupon rate of 6.1 percent. The bonds make s

Calculating YTM of a four year default bond

Use the following information to answer the question (s) below Maturity (years) 1 2 3 4 5 Zero- coupon YTM 3.25% 3.50% 3.90% 4.25% 4.40% Consider a four year default free bond with an annu

Yield to Maturity, Constant Growth and Preferred Stock

Yield to maturity:Rudy Sandberg wants to invest in four-year bonds that are currently priced at $789.69. These bonds have a coupon rate of 5.75 percent and pay semiannual coupons. The current market yield on this bond is _____%. (Round your answer to 2 decimal places. All intermittent calculations should be rounded to 4 de

Reporting Bond Liability on the Balance Sheet, Proceeds $975,000

Sold $1 million in bonds, 20 years at 4% with interest paid semi-annually. The proceeds from the bonds was $975,000 Each of the following was suggested as a possible valuation basis for reporting the bond liability on the balance sheet. 1. $975,625 (proceeds, plus 6 months straight line amortization) 2. $1 million (face v

Borrowing or Issuing Bonds

You are having a debate with your co-worker about potential financing needs and your co-worker feels that borrowing from the bank is a much better way to go versus issuing bonds. Discuss whether you agree or disagree with this and why?

Annual Coupon and Bonds

1. There $1000 face value, 10 year non-callable, bonds have the amount of risk, hence their required rate of return are equal. Bond 8 has an 8% annual coupon, Bond 10 has a 10% annual coupon, and Bond 12 has a 12% annual coupon. Bond 10 sells at par. Assuming that interest rates remain constant for the next 10 years, which of th

Problem 7.18: Transaction Analysis-Various Accounts

Enter the following column headings across the top of a sheet of paper: Transaction/Adjustment Current Assets Current Uabllitles Long-Term Debt Net Income   Enter the transaction/adjustment letter in the first column, and show the effect, if any, of each of the transactions/adjustments on the appropriate balance she

P7.8 7.10 Unearned Rev Bonds Payable Kirkland Theater Coley Co.

E7.8 Unearned revenues-ticket sales Kirkland Theater sells season tickets for six events at a price of $252. For the 2010 season, 1,200 season tickets were sold. Required: a. Use the horizontal model (or write the journal entry) to show the effect of the sale of the season tickets. b. Use the horizontal model (or wr

Bonds: Yield To Maturity (YTM) and Yield To Call (YTC)

Describe the differences between the yield to maturity (YTM) and the yield to call (YTC) on a bond. Why would the return to the investor be different if a bond is called? Why? What are bond ratings and how do they affect the ability of the firm to raise funds? Are these ratings similar to the ratings for a country or a com

Bonds: Cost of Capital

(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of    11.9%. The bonds have a current market value of $1,126 and will mature in 10 years. The firm's marginal tax rate is 34%. The c

Coupon and Coupon Rate

See attachment for data. 1. Suppose you decided to invest and these were your choices. (A)Which investments would you choose to maximize your expected return for stocks, bonds or commodities? (B)If you are risk-averse and had to choose between the stock or the bond investments which would you choose and why 2. If a $5,0

Two Forms of Debt

Please explain the differences between these two forms of debt: (1) $500,000 amortized five year loan with an annual interest rate of $5.0%, payments are made twice a year (every six months). (2) $500,000 five year bond with an annual interest rate of 5.0%, coupon payments are made twice a year (every six months), maturing b

Discount Rates & Present Value

Lockheed Martin and CACI International want to sell me a bond that will pay me $100,000 in one year. 1. Using the concept of present value and considering the risk of inflation, high interest rates, etc. what would I pay for this bond today? 2. How would I determine the discount rate given the following financial stats for

Bond Valuation and Selling

You own 10 shares of Standard Motors bonds. These bonds pay an annual coupon payment of $100 dollars, have a par value of $1000 and 10 years until maturity. Standard Motors is having financial difficulty and has requested postponement of the interest payments for the next 5 years. Standard Motors expects to make the interest pay