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# Bond Valuation

### Coupon Bond

You purchased a \$1,000 five percent coupon bond that matures in 10 years. How much would your bond be worth if interest rates fall to 4% the day after you purchase the bond? What would the bond be worth in one year if interest rates fell to 4% at that point?

Please help answer the following problems. Provide step by step calculations. A 20-year, \$1,000 par value zero-coupon rate bond is to be issued to yield 11 percent a. What should be the initial price of the bond? (Take the present value of 1000 for 20 years, using Appendix B at the back of the text.) b. If immediately

### Bond Yield: An investor must choose between two bonds.

An investor must choose between two bonds: Bond A pays \$80 annual interest and has a market value of \$800. It has 10 years to maturity. Bond B pays \$85 annual interest and has a market value of \$900. it has two years to maturity. a. Compute the current yield on both bonds. b. Which bond should be select based on your answer

### Finance: advantages of an LLC, market interest, compute IRR, cash cycle, bond prices

Question 1. The primary advantages of a limited liability company are the: a. corporation taxation and the avoidance of any financial loss. b. ease of trading the shares of stock in the firm and the personal taxation of the net profits. c. limited liabilities for the limited partners and the control of management

### Chelle Corporation bond: price change including convexity effect

Please show work Thank you A bond for the Chelle Corporation has the following charateristics: Maturity 12 Years Coupon 10% Yield to Maturity 9.50% Macaulay duration 5.7 Years Convexity 48 Noncallable a) Calculate the approximate price change for this bond using o

### Multiple Choice Questions: listing on a stock exchange, issuing securities, book value per share, after-tax cost of debt, Operating leases, financial lease, off-balance sheet lease financing, lease vs buy, conversion value of the bond, conversion price, before-tax yields, net advantage to leasing

1. Which of the following statements about listing on a stock exchange is most correct? a. Listing is a decision of more significance to a firm than going public. b. Any firm can be listed on the NYSE as long as it pays the listing fee. c. Listing provides a company with some "free" advertising, and status as a listed c

### Bond Valuation

Two years ago, you acquired a 10-year zero coupon, \$1000 par value bond at a 12 percent YTM. Recently you sold this bond at an 8 percent YTM. Using semiannual compounding, compute the annualized horizon return for this investment.

### Bond Valuation: Calculate bond's modified duration

Calculate the duration of an 8 percent, \$1,000 par bond that matures in the three years if the bond's YTM is 10 percent and interest is paid semi-annually. a) Calculate this bond's modified duration. b) Assuming the bond's YTM goes from 10 percent to 9.5 percent, calculate an estimate of the price change.

### Bond Valuation: Yield to Maturity and Yield to Call

Assume that you purchased an 8 percent, 20 year, \$1,000 par, semiannual payment bond priced at \$1,012.50 when it has 12 years remaining until maturity. Compute: a) Its promised yield to maturity. b) Its yield to call if the bond is callable in the three years with an 8 percent premium.

### Return on total assets problem

Question 40: Bramble Company's net income last year was \$82,000 and its interest expense was \$30,000. Total assets at the beginning of the year were \$600,000 and total assets at the end of the year were \$740,000. The company's income tax rate was 40%. The company's return on total assets for the year was closest to: 19

### Financial Management: calculating coupon rate, current yield and yield to maturity

Gray House is issuing bonds paying \$105 annually that will mature fifteen years from today. The bond is currently selling for \$980. Calculate: (a) Coupon Rate (b) Current Yield (c) Yield To Maturity

### Olympic Sports: Issues of Debt Outstanding

Olympic Sports have two issues of debt outstanding. One is a 9 percent coupon bond with a face value of \$20 million, a maturity of 10 years, and a yield to maturity of 10 percent. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 10 percent. The

### Cost of debt question

The pretax cost of debt, the aftertax cost of debt, and determining the importance of pretax versus the aftertax cost of debt. Here's some background information: Previously, I issued a 30 year, 10% semiannual bond about 7 years ago. The bond is selling at 108% of the face value and the tax rate is 35% Thank you

### A firm wishes to issue a perpetual callable bond. The current interest rate is 7%. Next year, the interest rate will be 6.5% or 8.25% with equal probability.

6) A firm wishes to issue a perpetual callable bond. The current interest rate is 7%. Next year, the interest rate will be 6.5% or 8.25% with equal probability. The bond is callable at \$1,075, and it will be called if the interest rate drops to 6.5%. If the coupon were set to \$70 what would the bond sell for? 7) A firm

### The maturity value of a \$15,000, 60-day, 5% note payable is

Following are some examples from a practice book that I have. I am kind of confused with the answers, if somebody could help me, I will really appreciate it. Thanks, 1. The maturity value of a \$15,000, 60-day, 5% note payable is _______. \$15,750 \$750 \$15,125 \$125 2. The following tot

### Yield on a corporate bond

The real risk-free rate, r*, is 3%. Inflation is expected to be 4% this year, 5% next year, and 3% per year thereafter. The maturity risk premium equals 0.1%(t-1), where t equals the bond's maturity. A 5-year corporate bond yields 8%. What is the yield on a 10-year corporate bond that has the same default risk and liquidity prem

### Clean Price of Bond

Accrued Interest You purchase a bond with an invoice price of \$1,210. The bond has a coupon rate of 5.4 percent, and there are 2 months to the next semiannual coupon date. The clean price of the bond is \$ . (Round your answer to 2 decimal places, eg 32.16.)

### Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron age 4, and are filing a joint tax return in the current year.

1. Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron age 4, and are filing a joint tax return in the current year. They are both employed. Lyle and Kaye, ages 38 and 37, respectively, have combined salaries of \$240,000, from which \$42,000 of federal income tax and \$10,000 of state income tax are

### Average Return, Standard Deviation of Return, Average Real Return for Treasury bills; Bond Valuation

Calculating Returns Refer to the following table: Year T-bills Inflation 1973 0.0729 0.0871 1974 0.0799 0.1234 1975 0.0587 0.0694 197

### Gray House Bond Calculation

Gray House is issuing bonds paying \$105 annually that will mature fifteen years from today. The bond is currently selling for \$980. Calculate: (a) Coupon Rate (b) Current Yield (c) Yield To Maturity

### Discussing Long-Term Financing Stocks and Bonds

What are the key differences between stocks and bonds with respect to ownership rights, claims on income and assets, maturity, risks, and tax treatment? Why might an organization choose one versus the other as a long-term financing instrument?

### Which of the following accounts in a merchandising company is affected by both the revenue cycle and another cycle?

Please answer the attached questions. Thanks! :) 1. Which of the following accounts in a merchandising company is affected by both the revenue cycle and another cycle? a. sales b. sales returns and allowances c. inventory d. accounts receivable e. accounts payable 2. The audit objective, "The accounts rec

### Issuance of Bonds with Warrants

Illiad Inc. has decided to raise additional capital by issuing \$170,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each \$100 bond sold. The value of the bo

### Stock, Bond, Warrants: speculative premium, nominal yield of the bond, par value of the common stock

1. The Burma Hat Company's warrant is trading for \$10.20. The warrant carries the options to purchase two shares of common stock for \$48.00. What is the speculative premium if the stock price is \$51.03? 2.Allais Company's bond has a @114 annual coupon, maturing in 10 years at a value of \$1,000 has a current market price of

### Bonds-Logan Corporation

Logan Corporation issued \$800,000 of 8% bonds on October 1, 2006, due on October 1, 2011. The interest is to be paid twice a year on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. Logan Corporation closes its books annually on December 31. Instructions

### Price Variance: How Many Kilograms Were Purchased?

A quantity of a particular raw material was purchased for \$43,250. The standard cost of the material was \$2.00 per kilogram and there was an unfavorable materials price variance of \$3,250. How many kilograms were purchased?

### Finance: Amount of payment to meet goal, price of bond, price of stock, NPV , WACC Please solve all problems in Excel. 1. Janice Smith wishes to accumulate \$8,000 by the end of 5 years by making equal annual end-of-year deposits over the next five years. If Janice can earn 7 percent on her investments, how much must she deposit at the end of each year to meet this goal? 2. J& J just issued a bond 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 (YTM) is 6.8%, what will be the bond sell for? 3. Biogenetics, Inc plans to retain and reinvest all of their earnings for the next 30 years. Beginning in year 31, the firm will begin to pay a \$12.00 per share dividend. The dividend will not subsequently change. Given a required return of 15%, what should the stock sell for today? 4. What is the NPV of a project that is expected to pay \$10,000 a year for 7 years if the initial investment is \$40,000 and the required return is 15%? 5. A firm has 2,000,000 shares of common stock outstanding with a market price of \$2.00 per share. It has 2,000 bonds outstanding, each selling for \$1,200. The bonds mature in 15 years, have a coupon rate of 10% and pay coupons annually. The firm's beta is 1.2, the risk free rate is 5%, and the market risk premium is 7%. The tax rate is 34%. Calculate the WACC?

Please solve all problems in Excel. 1. Janice Smith wishes to accumulate \$8,000 by the end of 5 years by making equal annual end-of-year deposits over the next five years. If Janice can earn 7 percent on her investments, how much must she deposit at the end of each year to meet this goal? 2. J& J just issued a bond wi

### Issuance and Amoritization of Bonds

RST Company sold \$9 million of four-year, 8% debentures on July 1, 2007. The bonds sold to yield a real rate of 7%. Interest is paid annually on June 30. A. Determine the price of the bonds. B. Prepare an amoritization schedule for the bonds. C. Record the entry to the accounting system that is necessary to recognize interest

### Equivalent Before-Tax Return from a Non-Municipal Bond

1. If an investor is in a 34 percent marginal tax bracket and can purchase a municipal bond paying 7.25 percent, what would the equivalent before-tax return from a nonmunicipal bond have to be equate the two? 2. If an investor is in a 30 percent marginal tax bracket and can purchase a straight (nonmunicipal bond) at 8.37 perc

### Ch 8 Bond Calculations: problems 1, 2, 3, 5, 6, 8, & 11

Complete problems: 1, 2, 3, 5, 6, 8, & 11 on text pp. 274-276 of Ch. 8. 1. Determine the value of a \$1,000 denomination Bell South bond with a 7 percent coupon rate maturing in 20 years for an investor whose required rate of return is: a. 8 percent b. 7 percent c. 5 percent 2. Consider Allied Signal Corporation's perc