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# Bond Valuation

### Yield to maturity & the Yield to call

A bond with 25 years to maturity and 5 years to call sells for \$964.50 and has an annual coupon rate of 11%. The bond will pay a call premium of one extra year's interest. The bond pays coupons semiannually. Calculate the yield to maturity. Calculate the yield to call.

### \$1,000 five percent coupon bond: If interest rates change, what will bond be worth?

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?

### Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of \$1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?

Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of \$1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?

### MCQ: How much to pay for a bond, bond value increase, call outstanding callable bonds

4. You wish to purchase a 20-year, \$1,000 face value bond that makes semiannual interest payments of \$40. If you require a 10% nominal yield to maturity, what price should you be willing to pay for the bond? \$619 \$674 \$761 \$828 \$902 5. Which of the following bonds will ha

### 1-3 Finance -The Carter Company's bonds mature in 10 years have a par value of \$1,000 and an annual coupon payment of \$80. The market interest rate for the bonds is 9%. What is the price of these bonds?

1. The Carter Company's bonds mature in 10 years have a par value of \$1,000 and an annual coupon payment of \$80. The market interest rate for the bonds is 9%. What is the price of these bonds? \$935.82 \$941.51 \$958.15 \$964.41 \$979.53 2. Rollincoast Incorporated issu

### Financial Markets and Stocks and Bond Quotations: 4 MCQ

Please see attached file. 2. An investor bought 100 shares of Venus Corporation common stock 1 year ago for \$40 per share. She just sold the shares for \$44 each, and during the year, she received four quarterly dividend checks for \$40 each. She expects the price of the Venus shares to fall to about \$38 over the next year.

### What is the call price on the bonds?

Kennedy Gas Works has bonds which mature in 10 years, and have a face value of \$1,000. The bonds have a 10 percent quarterly coupon (i.e., the nominal coupon rate is 10 percent). The bonds may be called in five years. The bonds have a nominal yield to maturity of 8 percent and a yield to call of 7.5 percent. What is the call pri

### Impact of Discount and Premium

Impact of a Discount Berol Corporation sold 20-year bonds on January 1, 2008. The face value of the bonds was \$100,000; and they carry a 9% stated rate of interest, which is paid on December 31 of every year. Berol received \$91,526 in return for the issuance of the bonds when the market rate was 10%. Any premium or discount i

### XYZ's seven-year \$1,000 par bonds. What is expected rate of return?

The XYZ's seven-year \$1,000 par bonds pay 9 percent interest. Your required rate of return is 7%. The current market value for the bond is \$1,100. i. Determine the expected rate of return ii. What is the value of the bonds to you given your required rate of return? iii. Should you purchase the bond at the current market p

### Cost of common equity

Percy Motors has a target capital structure of 40 percent debt and 60 percent common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 9 percent, and its tax rate is 40 percent. Percy's CFO estimates that the company's WACC is 9.96 percent. What is Percy's cost of common equity?

### Bonds: How would bond value change if interest rates fall?

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 is issued by a continental European government and makes annual coupon payments. Then rework your answer assuming that the bond is issued by the U.S. Treasury, so that the bond pa

### 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?

### Compute two current bond yields. Which should be selected based on facts.

An investor must choose between two bonds: Bond A pays \$92 annual interest and has a market value of \$875. It has 10 years maturity. Bond B pays \$82 annual interest and has a market value of \$900. It has two years to maturity. a. Compute the current yield on both bonds? Bond A --- 92/875=10.5% Bond B ---82/900 = 9.

### Question about Zero-Coupon Bond

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. Olympic sports has two issues of debt outstanding. One is a 9 percent coupon bond with a face value of \$20million

15. Cost of Debt. Olympic sports has two issues of debt outstanding. One is a 9 percent coupon bond with a face value of \$20million, a maturity of 10 years, and a yield to maturity of 10 percent. The coupons are paid annually, and a coupon rate 10 percent. The face value of the issue is \$25 million, and issue sells for 94 pe

### 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

### What are some of the valuation techniques commonly used in M&A? Compare and contrast the valuation techniques common to M&A activities.

What are some of the valuation techniques commonly used in M&A? Compare and contrast the valuation techniques common to M&A activities. What is the purpose of having valuation techniques when pursuing a particular M&A strategy?

### 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