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Bond Valuation

Security Valuation Models

Problem 1: Watters Umbrella Corp issed 15 yr bonds 2 yrs ago at a coupon rate of 7.8%. The bonds make semiannual payments. If these bonds currently sell for 105% of par value, what is the YTM? Problem 2: The next dividend payment by ZYX, Inc., will be $2.85 per share. The dividends are anticipated to maintain a 4.5% growth

Different Types of Bonds and Valuing Bonds

I am trying to get a better understanding of bonds. What are the different types of bonds and how do they differ from each other? I am trying to understand how valuing bonds is done and how interest rate affect their value. How does this tie in with yield to date maturity?

Costs Related to Bond Issues

Bond issue is for $50M, carrying a 5.58% coupon and a 20-year maturity. It is recommended the price issues to yield 5.6%. 1. Calculate the cost of repricing the bond issue. 2. Provide the expected additional cost associated with the recommendation of pricing the issue to yield the more competitive return. 3. Provide the addi

Conversion Values

1. A $5,000 face value municipal bond matures in 8 years and has a market value of $5,120. The coupon rate is 3.5 percent with interest paid semiannually. What is the yield to maturity? 2. A bond has a par value of $1,000 and a market price of $1,087.20. The conversion price is $40 and the stock price is $41.75. What is the

Bonds and Market Price

Which of the following is (are) a true statement(s) pertaining to bonds? a) bonds can be sold at a discount, par or payable b) bonds can be sold at a discount, par, or premium c) The SEC sets the market price of a bond d) The issuing firm sets the price of a bond e) None of the above

Investment and Portfolio Management: The Woodside Petroleum Ltd.

The Woodside Petroleum Ltd. (http://www.woodside.com.au/Pages/default.aspx) is Australia's largest publicly traded oil and gas exploration and production company and one of the world's leading producers of liquefied natural gas? Woodside has entered into an agreement for the issuance of US$700,000,000 in corporate bonds into the

Control Over Retirement Savings

How much control do you think you have over your own retirement savings? In other words, after all said and done in above, do you really think you can reasonably count on your retirement savings at the time of your retirement? If yes, explain how and why. If no, explain your thoughts and concerns. Explain in an organized fashion

Bond Issue and Public Relations

The Mayor and the City Council are championing the issuance of a new bond issue to finance infrastructure improvements needed for the School District. We need to inform the voters of the issues that are involved and how the bond issue will solve the District's problems and what impact the bonds will have upon them. We would appr

Bond Pricing Factors and Direction of Response.

What are 3 factors that cause a bond's price to change and what is the predicted direction of change for the bond's price from changes in these factors? How do risks associated with non-dollar denominated bonds impact the price of the bond and the dollar denominated return?

Bond Valuation and Worksheet

Please see the attached files. Could you please use formula or add comments so that I understand it for the future? I also attached copies from my book regarding this problem. Thank you!

Accounting and annual rates of return

Answer the following questions assuming a 360-day year. Calculate the approximate annual rate of return on investment of the following cash discount terms: 1/15, net 30 2/10, net 60 1/10, net 90

Bond Rating firms: What is role? Players? 2008 crisis?

Bond investments have become much more prominent as many major pension plans have begun to invest more in bonds and less in the volatile stock market. Bond rating companies play a critical role in this process. What is their role? Who are the major rating companies? Some analysts say these companies played a major role in th

Duration

What is the duration of a bond with three years to maturity and a coupon of 6 percent paid annually if the bond sells at par? (Round your answer to 5 decimal places. (e.g., 32.16161)

Cash Flow Statement: Fulton Enterprises Case

Fulton Enterprises Project Analysis - Stage 2 Fulton Enterprises has reviewed the project discussed last week and has decided upon further review that the Scenario 2 is the most likely cash flow. Scenario 2: Sales in year 1 are $900,000 per year and will increase 5% per year through year 5. This scenario has a probabilit

Calculate the Price of a Bond Given Various Interest Rates

A bond has a face value of $100, a coupon rate of 8% and 5 years to redemption at par. The annual interest payment has just been made. (a) What is the price of the bond if market interest rates are; (i) 6% (ii) 7% (iii) 8% (iv) 10% (b) What is the duration of the bond if market interest rates are 7%? (c)

Hobbies Inc.: Bond Example Questions

On January 1, 2011, Hobbies Inc sold 10 year term bonds with a face value of $1,000,000. The bonds carried a coupon rate of 5% paid annually. The market rate on the date the bonds were issued was 6%. The proceeds that were received by Hobbies Inc. upon issuance of the bonds were $940,000. A. How much actual interest must Hobb

Present Value of a Discount Bond

Find the present value (price) of a discount bond with a one-year term to maturity and a 10% yield. Next, find the price of a ten-year discount bond that also yields 10%. Now, increase the yield on both instruments to 11%. On a percentage basis, which instrument demonstrates the greatest change in price? What does this indicate

Estimating the price and return of the given bond.

DEF has an outstanding debt issue. The debt maturity is May 10, 2018 with a 6.25% coupon, which is paid semiannually. The bond has a face value of $1000 and yield is 1.61% compounded semiannually. 1. Estimate the price of the bond on November 10, 2014 after the coupon is paid. 2. Company B purchases the bond on November

Which coupon rate should the bonds have in order to sell at par value?

Please help with the following problem. Provide step by step calculations. Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,250. One-year interest rates are 10 percent. There is a 50 percent probability that long-term interest rates one year from today

Calculate the current price of given securities.

1) Valuation - zero-coupon bond A U.S. Government bond has a face amount of $10,000 with 8 years to maturity, yielding 3.5%. What is the current selling price? 2) Valuation - corporate bond A $1,000 corporate bond with 20 years to maturity pays a coupon of 7% (semi-annual) and the market required rate of return is either a

Calculate the fair value of option, stock and bond as the case may be.

1. Valuation - zero-coupon bond A U.S. Government bond with a face amount of $10,000 with 8 years to maturity is yielding 3.5%. What is the current selling price? 2. Valuation - options The following information refers to a six-month call option on the stock of XYZ, Inc. Price of the underlying stock: $50

Are you better off playing the lottery or buying bonds?

5.3 Are you better off playing the lottery or saving the money? Assume you can buy one ticket for $5, draws are made monthly, and a winning ticket correctly matches 6 different numbers of a total of 49 possible numbers. The probabilities: In order to win, you must pick all the numbers correctly. Your number has a 1 in 49 cha

Stocks or bonds over time periods

Are stocks or bonds better investments over: -A one-year period? Explain your reasoning. -A five-year period? Explain your reasoning. -A twenty-five year period? Explain your reasoning.

Calculating Investments and Stocks

Question 1: You would like to have $1,000,000 accumulated by the time you turn 65, which will be 40 years from now. How much would you have to put away each year to reach your goal, assuming you're starting from zero now and you earn 10% annual interest on your investment? Question 2: You hold a portfolio of stocks c

Global Bond Market Indexation

Illustrate the need for, motivation, and concept of Indexation with an example to protect against Inflation in the Global Debt Markets.

Promised Yield on the Bond Calculation

Consider a one-year, $1000, zero-coupon bond issued. Assume that the bond payoffs are uncertain. There is a 50% chance that the bond will repay its face value in full and a 50% chance that the bond will default and you will receive $900. Thus, you would expect to receive $950. Because of the uncertainty, the discount rate is 5.9

Calculating Bond Maturity

An investor is considering a bond that currently sells at a discount ($953) to the face value of $1,000. The coupon rate is 9.25% paid semiannually. If there are 15 years left on the bond what is the yield to maturity?

Bond Values and Yields

Describe or define and discuss a bond issued by a city that is having a little bit of a problem with creditworthiness (but not "junk" level yet) and how it is differentiated from other bonds. Then explain how valuing bonds is done and how interest rates affect their value. Consider the importance of the yield-to-maturity (YTM) i