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Bond Valuation

Corporate finance multiple choice questions: CAPM, price of bonds, dividends

1) You are holding a stock which is currently in equilibrium. The required rate of return on the stock is 15 percent when the required return on the S&P 500 index is 10 percent. What will be the percentage change in the required return on the stock if the required return on the S&P 500 index increases by 30% while the risk free

Bond Valuation-Current Price

I have two problems and I am drawing a blank on how to work them. Please provide step by step calculations for each. 1. Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $40. If you require a 10 percent simple yield to maturity on this investment,

Price of a bond and the bonds yield to maturity; time value of money

Fully answer questions please. 1. Describe the relationship that exists between the price of a bond and the bonds yield to maturity (YTM) Why does this relationship exist? 2. Explain the concept of time value of money. How is it applied in finance and why is it so important? thanks

Capital Structure (Cost of Capital) Bonds & Stocks

Examine the following book-value balance sheet. What is the capital structure of the firm based on market value? Solve for Formulas below? The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are one million common share outstanding. Assets Cash and short-term securities

Semiannual Compounding, bonds, Securities; RRR, growth rate, common stock,

See attached file. Use semiannual compounding on all bond problems unless otherwise indicated 1. Will you invest in a security that has a current price of $50, a growth rate of 6% and an expected dividend of $3.80 if your RRR is 12%? 2. Would you invest in the stock in #18 if your RRR was 8%? Would you invest in it if t

Semiannual Compounding on Bond, Coupon Bond, Rate, Interest, Yield, change

See attached file. Use semiannual compounding on all bond problems unless otherwise indicated. 1. Determine the price of a $1,000 6% coupon rate bond that pays interest semiannually and has 5 years before maturity when similar securities have yields of 5%. 2. How much money will you be willing to pay for a 3 year $1,000


The following information applies to all three parts: A bond with a face value of $10,000 pays $600 in interest every six months for 10 years and a lump sum of $10,000 at the end of the tenth year. The current market requires 10% interest compounded semiannually. 1) What would an invester be willing to pay now for the $1


Lambert Corning, Inc. specializes in buying heavily undervalued bonds. To do that this firm mainly searches bonds, which are being trading at well below par value and have relatively longer period to maturity. He has his eye on a bond issued by King Co. The $1,000 par value bond provides 11 percent annual coupon rate and has

Business Finance

Could some please show me step by step how to work these 3 problems: (FOR TABLES/QUESTIONS IN FULL, PLEASE SEE ATTACHMENT) 1. You currently own the following portfolio of stocks (table). You are planning to sell $300,000 of stock C and $200,000 of stock A and invest the proceeds in stock D. What would be the portfolio's requ

Bond valuation is demonstrated.

A $1,000 par value bond pays $50 in interest every six months. What will be the value of the bond if it matures in 30 months and the yield-to-maturity of similar risk bonds is 8%?

Bond return

A $1,000 par value, 6-year bond pays $100 of interest annually. It is priced at $1,314.53. Assume that one year from now rates have dropped by 1% (for example, from 15% to 14%). What would be an investor's one-year holding period return if she purchased the bond today and sold it one year from today?

Finance Questions: Securities; Yeilds; Stocks; Claims; Integration; Exchange

5. Take the following list of securities and arrange them in order of their priority of claims (*see attachment for list*) 10. What is the difference between the following yields: coupon rate, current yeild, yeild to maturity? 4. How does the preemptive right protect stockholders from dilution? 5. If common stockholders

Bond Valuation, Yield to Maturity and the After Tax Cost of Debt

Russell Container Corporation has a $1,000 par value bond outstanding with 20 years to maturity. The bond carries an annual interest payment of $95 and is currently selling for $920 per bond. Russell Corp. is in a 25 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yiel

Bond price when inflation premium changes

T Cruise Lines, Inc., issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 12 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return . . . . . . . . . . . . 3% Inflation prem

Identify the yield to maturity on similarly outstanding debt for the firm, in terms of maturity. If the firm is in a 30 percent tax bracket, what is the aftertax cost of debt?

8. New Jersey Bell Telephone Co. is planning to issue debt that will mature in the year 2024. In many respects the issue is similar to currently outstanding debt of the corporation. Using Table 11-2 on page 304 (see attached file), identify: a. The yield to maturity on similarly outstanding debt for the firm, in terms of matu

An example of a one corporate bond is embedded.

Find a Internet source that lists bonds on a daily basis. Find one corporate bond and provide relevant information (think key inputs to the calculator) and explain whether it is selling for a premium or a discount.

What is the price of Genetech's stock today? How risky is Genetech's stock? What is the coefficient of variation of the market portfolio and its standard deviation and variance? What is the current yield and capital gains yield, if sold today?

5. Genetech, Inc has just unraveled the secret to the aging process in a patentable new drug called ester Co-enzyme Beta. Because of this discovery Genetech's stock has just issued a dividend of $1.42 per share. Estimates have it that the dividend will grow before taxes by 5 percent for the next four years, decline by -3 perce

Bonds (Yield; Liability; Bond Maturity)

Suppose the attached coupon info. Yield to maturity is 6% Suppose I have a liability to of $20,000 to pay at the end of year 7 1. How to immunize my liabilities with the following constraints? Case A: Can invest any bond of different maturity shown above Case B: Can only invest any bond (shown above) of with maturitie


Bonds can be issued at face value, at a discount or at a premium. What factor explains why bonds are issued at a discount? A. The issuing firm is anxious to sell them. B. The yield rate is less than the coupon rate. C. The yield rate is greater than the coupon rate. D. The bonds are considered less risky than similar b


On July 15, 2000, Green Valley Cooperative issued $400,000 of bonds with a stated interest rate of 8%, payable annually. These bonds mature 20 years after issuance and yielded 6% on the sale. Therefore, the bonds were issued at: A. a premium B. a discount C. total future value D. face value

compute the appropriate discount rate

As a consultant to GBH Skiwear, you have been asked to compute the appropriate discount rate to use to evaluate the purchase of a new warehouse facility. You have determined the market value of the firm's capital structure as follows: Source of Capital Market Value Bonds $500,000 Preferred stock $100,0


First Fidelity has asked you to bid for a zero coupon loan portfolio A with a term of 5 years. Their internal controls suggest it has a 90% chance of a paying $100.00 at maturity and a 10.00% chance of a paying $90.00. City Mutual recently sold a similar term loan portfolio B which you estimated as having a 60% chance of a pa

Interest rates, risk-free rate, expectation, liquidity, 1 year treasury bond,

1. The interest rate on 1-year Treasury securities is 5 percent. The interest rate on 2-year Treasury securities is 6 percent. The expectations theory is assumed to be correct. If the real risk-free rate is assumed to be 3% every year, what is the inflation expected in year-2? 2. The real risk-free rate of interest is 3 perc

Between planes -- need quick response

Which answer is correct and why? A 10-year bond has a 10% annual coupon rate and a yield to maturity of 12%. This bond can be called in 5 years at a call price of $1,050; the bond's par value is $1,000. Which one of the following statements is most correct? a. The bond's current yield is greater than 10%. b. The bon