(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
(See attached file for full problem descriptions) Cox Media Corporation pay an 11 percent coupon rate on debentures that are due in 20 years. The current yield to maturity on bonds of similar risk is 8 percent. The bonds are currently callable at $1,060. The theoretical value of the bonds will be equal to the present va
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
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
Uncle Sal, the family accountant is home from his failed attempt at striking it rich in Vegas and wants to make up for it by selling a few securities on the side. He has an offer that he is pitching to an older lady he calls "Granny." The offer is for a 30 year bond issued by an insurance company and paying 7% annual interest.
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
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
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
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
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
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?
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
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) 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).
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.
Suppose you have invested $30,000 in the following four stocks: Security Amount Invested Beta Stock A $5,000 0.75 Stock B $10,000 1.1 Stock C $8,000 1.36 Stock D $7,000
(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
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
$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
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
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
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
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
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
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