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Bond Valuation

Bond valuation, yield to call, YTM, constant growth, nonconstant growth, corporate valuation. See the attached pdf files. Please show all calculations and respond only to questions which are circled.

1) Constant Growth: You are condsidering an investment in Keller Corp's stock, which is expected to pay a dividend of $2.00 a share at the end of year (D1=$2.00) and has a beta of 0.9. The risk free rate is 5.6%, and the market risk premium is 6%. Keller currently sells for $25.00 a share, and its dividend is expected to grow at

Estimating Price of a Coupon Paying Bond

What is the price of a 10 year $1000 Par Value Bond if the coupon rate is 10% (pays $100 a year if dividends paid annually) with 8 years to go to maturity. Interest rates (expected rate of return) is 8%?

General Electric: Yield To Maturity / Yield to Call

General Electric has just issued a callable (at par) ten-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $102. What is the bond's yield to maturity and yield to call? Can you help me get started with this assignmen

Bond Prices: BBB-rated corporate bonds and Treasury Bonds

Can you help me get started with this assignment? A BBB-rated corporate bond has a yield to maturity of 8.2%. A US Treasury security has a yield to maturity of 6.5%. These yields are quoted as APR's with semiannual compounding. Both bonds pay semiannual coupons at a rate of 7% and have five years to maturity. a. What is

A. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? b. What is the credit spread on AAA-rated corporate bonds? c. What is the credit spread on B-rated corporate bonds? d. How does the credit spread change with the bond rating? Why?

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.1 AAA corporate 3.2 BBB corporate 4.2 B corporate 4.9 a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? b. Wha

Bond YTM, price and is it trading at a discount, at par, or at a premium?

Suppose a seven-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading with a yield to maturity of 6.75%. Is this bond currently trading at a discount, at par, or at a premium? Explain. If the yield to maturity of the bond rises to 7.00% (APR with semiannual compounding), what price will the bond trade for?

Compute Bond's YTM and price.

Suppose a ten-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for a price of $1,034.74. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? If the bond's yield to maturity changes to 9% APR, what will the bond's price be? Please show in excel.

Calculating The Expected YTM

International Tile Importers, Inc., is a rapidly growing firm that imports and markets floor tiles from around the world that are used in the construction of custom homes and commercial buildings. The firm has grown so fast that its management is considering the issuance of a five-year interest-only note. The notes would have a

Bond Purchase

You are considering purchasing a bond at the end of this year. The bond has a coupon rate of 10.5 percent, interest payments are made annually, and the bond matures in 20 years. If your required pretax rate of return is 14 percent, what is the maximum price you would be willing to pay for a 20-year, 10.5 percent bond? Assume the

Valuation of bond with annual and semiannual coupon payments

Suppose that 5-year government bonds are selling on a yield of 4 percent. Value a 5-year bond with a 6 percent coupon. Start by assuming that the bond makes annual coupon payments. Then rework your answer assuming that the same bond pays semiannual coupons and the yield refers to a semiannually compounded rate. Further, how

Finance Questions (Gates Computers)

1. Gates Computers has the following data for the previous year: Net income = $200; Net operating profit after taxes (NOPAT) = $300; Total assets = $1,000; and Total net operating capital = $800. The information for the current year is: Net income = $500; Net operating profit after taxes (NOPAT) = $400; Total assets = $1,300; an

Warrants Attached to Bonds

Can you help me get started with this assignment? Sandi 1 Company recently issued two types of bonds. The first issue consisted of 20-year straight debt with an 8% annual coupon. The second issue consisted of 20-year with bonds a 6% annual coupon and attached warrants. Both issues sold at their $1000 par value. What is the im

Total cost/price, expected stock price, project IRR

Can you help me get started with this assignment? 43. If the CEO of a firm were filling out a fitness report on a division manager (i.e., "grading" the manager), which of the following situations would be likely to cause the manager to get a BETTER GRADE? In all cases, assume that other things are held constant.

Academic approach to Bond valuation

Suppose that General Motors Acceptance Corp issued a bond with a ten years until maturity.A face value of $1000 and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. a. What was the price of this bond when it was issued. b. Assuming the yield to maturity remains constant

Zero Coupon yield curve

Can you help me get started with this assignment? Maturity (years) 1 2 3 4 5 YTM 5% 5.5% 5.75% 5.95% 6.05% a. What is the price per $100 face value of two-year, zero-coupon risk free bond? b. What is the price per $100 face value of a four-year,

Expected One-Year Interest Rate

Based on the following yields on zero-coupon bonds, calculate the expected one-year interest rate for year 4 Time to maturity - Yield to maturity 1 years - 6.00% 2 years - 7.00% 3 years - 8.32% 4 years - 8.49%.

Greater interest rate risk

Which has greater interest rate risk, a newly issued 10-year bond with a coupon rate of 6% or a newly issued 5-year bond with a coupon rate of 4%? Both bonds have the same yield to maturity. a) the 10-year, 6% coupon bond b) the 5-year, 4% coupon bond c) both bonds have the same level of interest rate risk d) there is not

Duration and Convexity of a Bond

Calculate the duration and convexity of a two-year bond, with an 8% coupon rate (coupons are paid semiannually), 10% yield-to-maturity and a face value of ?1000. If the yield increases by 50 basis points (=0.5%), how much does the price change? How incorrect is the linear estimation?

The Houston Corp. needs to raise money for an addition to its plant.

Question 1 The Houston Corp. needs to raise money for an addition to its plant. It will issue 300,000 shares of new common stock. The new shares will be priced at $60 per share with an 8.5% spread on the offer price. Registration costs will be $150,000. Presently Houston Corp has earnings of $3 million and 750,000 shares

Dividend yield, YTM, YTC

1. The expected rate of return on the common stock of Northwest Corporation is 14 percent. The stock's dividend is expected to grow at a constant rate of 8 percent a year. The stock currently sells for $50 a share. Which of the following statements is most correct? a. The stock's dividend yield is 8 percent. b. The stock

Plano Co: How much gain should be reported on the sale of bonds?

During 2005, Plano Co. purchases 2,000, $1,000, 9% bonds. The carrying value of the bonds at December 31, 2007 was $1,960,000. The bonds mature on March 1, 2012, and pay interest on March 1 and September 1. Plano sells 1,000 bonds on September 1, 2008, for $988,000, after the interest has been received. Plano uses straight-l

Finding Call Period for Bond

Mattco has 9% annual coupon, $1,000 face value bonds outstanding that mature in 10 years. However, the bonds can be called before maturity at a call price of $1,050. The bonds have a yield to call of 6.5% and a yield to maturity of 7.4%. How long until these bonds may first be called?

Time Value of Money in bond market value; zero growth in common stock

Valuation of common stock and bonds is an important financial task for investors. In the process of valuing bonds describe the relationship of time to maturity and market value (for premium, par-value, and discount bonds) and the relationship of required return to market value. For common stock define the zero growth (divide

Yield to maturity on a 30 year bond

Consider a 30-year bond issued two years ago with a 9 percent coupon rate and $1,000 par value. The bond makes semi-annual payments and currently sells for $906.51. What is the bond's yield to maturity? (YTM) Why is the bond is selling at a discount?