A 5-year corporate bond has an 8 percent yield. A 10-year corporate bond has a 9 percent yield. The two bonds have the same default risk premium and liquidity premium. The real risk-free rate, r*, is expected to remain constant at 3 percent. Inflation is expected to be 3 percent a year for the next five years. After five ye
Question 1 Problem 4-14 (please see the attached excel file) "Calculating Yield and years till maturity" Fill in the table below for the following zero coupon bonds. The face value of each bond is $1,000. Use the RATE, NPER, and PV function to solve for the unknowns in the table below. Yield to Price Maturi
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is: a. 7 percent. b. 10 percent. c. 13 percent. Harrison Ford Auto Company has a $1,000 par value bond outstanding that pays 11 percent int
In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today, January 1, 2004, is as follows: Long-term debt (bonds, at par) $10,000,000 Preferred stock
1. What are the key features of a bond? 2. What are call provisions and sinking fund provisions? Do these provisions make bonds more or less risky? 3. How is the value of any asset whose value is based on expected future cash flows determined? 4. What is the yield to maturity on a 10-year, 9% annual coupon, $1,000
Can you please assist me with theses questions? 3. A bond has a coupon rate of 8.5% and 18 years until maturity. If the yield to maturity is 6.7%, what is the price of the bond? 5. A bond sells for $864.50 and has a coupon rate of 6%. If the bond has 16 years until maturity, what is the yield to maturity of the bond? 8
See attached file for full problem description. --- A 10-year 12 percent semiannual coupon bond, with a par value of $1,000, may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued), a. What is the bond's yield to m
I need help with this practice problem. I am going to have something very similar on an exam and can't figure out how to solve it. Bonds of Zello Corporation with a par value of $1,000 sell for $960, mature in 5 years, and have a 7% annual coupon rate paid semiannually. Calculate: a. Current yield. b. Yield to maturity (t
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is: a. 7 percent. b. 10 percent. c. 13 percent. Harrison Ford Auto Company has a $1,000 par value bond outstanding that pays 11 percent inte
Recently the high and low market prices of Canadian Pacific Limited's debentures (4 %) were $790 and $475 respectively. Determine the yield-to-maturity of one of these debentures if it was purchased under the following conditions: a. at the high market price b. at the low market price
Lester purchases a 30-year Treasury bond today. This bond is selling at par ($1,000) and has a coupon rate and yield to maturity of 7% (the bond pays interest annually). Now suppose that next week, a number of economic events occur which raises the rate of inflation. As a result the market rate of interest rises from 7% to 8%
You buy a 10% coupon bond 1 year ago for $1,060 it has a 1,000 face value and this bond sells for $1,085 today. 1. what is your total dollar return on this investment over the past year? 2. what is the total nominal rate of return over the past year? 3. if the inflation rate last year was 9%, what is your total rea
12% coupon bonds, with 5 yrs left to maturity, bonds make annual payments, if the bond currentyly sells for $1,107.93 what is the YTM? so i did: 12%=$120 every year for 5 years 1,107.93=$120 x [ 1-1 / (1+r)5] /r +1000/(1+r)5 ( the five is an exponent ) yet i do not know how to find the rate of return to finish up
What is the value of a 20-year, 7% annual coupon bond if Kd equals 9%? What is the value if inflation increases 3%? What is the value if inflation decreases 3%? Show formulas and entries on a financial calculator.
1. You are considering an investment in the bonds of a company. The bonds which pay interest semiannunally, will mature in 8 8years and have coupon rates of 9.5%. Currently the bonds are selling for $872. a) If your require rate of return is 11% for bond in the risk class, what is the highest price you would be willing to
Bonds and stocks are very similar securities in many respects. For example, market value of both are determined by their expected future cash flows; and both show price sensitivity- some more, some less- to a set of common market factors. At the same time, some may even go further and state that when it comes to portfolio invest
--- 1. Calculate the duration of a $1000, 6% coupon bond with three years to maturity. Assume that all market interest rates are 7%. 2. Considered the bond in the previous question. Calculate the expected price change if interest rates drop to 6.75% using the duration approximation. Calculate the actual price change using di
A bond has been issued with a $1,000 face value and a coupon rate of 7%. If the bond has a life of 30 years, pays annual coupons and the yield to maturity is 6.8% what will this bond sell for?
ABC Industries bond has a 10 percent coupon rate and a $1000 face value. Interest is paid semiannually, and the bond has 20 years to maturity. If investors require a 12 percent yield, what is the bond's value? What is the effective annual yield on the bond? XYZ corp. bond carries an 8 percent coupon, paid semiannually. The pa
How would set the following problem up in excel? I understand longhand YTM & Current yield but am lost in excel. XYZ issued a new series of bonds on January 1, 1981. The bonds were sold at $1,000 par, have a 10% coupon, and mature in 2010. The coupon is semi-annual. What was the YTM of the bonds on January 1, 1981? What
KIC Inc. plans to issue $5 million of perpetual bonds. THe fave value of each bond is $1,000. The annual coupon bond is 12%. Market interest rates on one-year bonds are 11%. With eqaul probability, the long-term interest rates will be either 14% or 7% next year. Assume investors are risk-neutral. A. If the KIC bond are noncallab
1. Consider a $1,000 par value bond with a 7% annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10%? 2. Assume that you plan to buy a share of XYZ stock today and to hold it for 2 years. Your
Have 2 bonds x and y (both make annual payments) bond x is a premium bond , pays a 10% coupon, has a ytm of 5 % and 17 years to maturity. bond y is a discount bond, pays a 5% coupon, has a ytm of 10% and 17 years to maturity. i have to find out the value of the bonds 6 and 10 years from now :(if interest rates remain unchan
Three problems on Stocks and Bonds: Calculate the required rate of return for Mercury Inc. What is the market risk premium? What is the bond's annual coupon rate?
1. Calculate the required rate of return for Mercury Inc., assuming that investors expect 5% rate of inflation in the future. The real risk-free rate is equal to 3% and the market risk premium is 5%. Mercury has a beta of 2.0, and its realized rate of return has averaged 15% over the last 5 years. 2. A stock has an expect
1. Helen's Pottery Co.'s stock recently paid a $1.50 dividend (D0 = $1.50). This dividend is expected to grow by 15% for the next 3 years, and then grow forever at a constant rate, g. The current stock price is $40.92. If ks (required rate of return) = 10%, at what constant rate is the stock expected to grow following Year 3?
Create a scenario in which you have to make a decision between two investments. In order for you to decide which investments will be the most profitable you must calculate the time value of money. Use hypothetical investment dollars, interest rates, and terms to illustrate your problems and support your conclusions. Research
Consider the data in the "example" sheet. (File attached). You are given the STRIP prices for March 29th 1996. You are to test whether the prices of STRIPS and that of Treasury notes are consistent. That is we are looking for mis-pricing and abitrage opportunities. There is a 6 and 1/4 Treasury note (pays 6.25% coupon semi-annu
Co issued $750,000 of 4%, 12-year bonds on 10/1/05 plus accrued interest at a time when the market rate of interest was 6%...
Co issued $750,000 of 4%, 12-year bonds on 10/1/05 plus accrued interest at a time when the market rate of interest was 6%. The bonds have an authorized date of 8/1/05 and pay interest each 2/1 and 8/1. The effective-interest method is used to amortize any discount or premium. Compute the: 1) semi-annual interest payment
Company issued $1,500,000 of its 10%, 20-year bonds on their authorized date of 6/1/05. The bonds were issued at a price of $1,796,893 to produce an effective yield of 8%. Interest payments are made twice per year, 6/1 and 12/1, with discounts and premiums being amortized using the effective interest method. Compute the 1