Explore BrainMass

# Bond Valuation

## BrainMass Solutions Available for Instant Download

### Price of bond, Required rate of return (yield) on preferred stock, Price of the common stock

1. Burns Fire and Casualty Company has \$1000 par value bonds outstanding at 11% interest. The bonds will mature in 20 years. Compute the current price of the bond if the present yield to maturity is at 6%. (Interest payments are on an annual basis) 3. Analogue Technology has preferred stock outstanding that pays a \$9 annual d

### Price of the Bond and Coupon Interest Payment

According to www.bondpage.com on Feb 22, 2006, dealers were offering the US government's 10.625% 2015 Treasury Bond for "145.958." Answer the following questions about the bond: a. What is the price in dollars of the bond? b. What is the amount of the coupon interest payment you would receive each year if you bought th

### Accounting What the Numbers Mean

Problem is attached. Review problem-time value of money applications. Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions: Required: a) Wright Co.'s common stock is expected to have a dividend of \$5 per share for each of the next 10 years, and it is estimated that the market value p

### Questions Regarding International Finance

1. The \$: ? exchange rate is \$1 = ?0.85, and the SFr/? exchange rate is SFr 1 = ?0.75 What is the \$/SFr exchange rate? 2. Suppose that the forward ask price for March 20 on euros is \$0.9227 at the same time that the price of IMM euro futures for delivery on March 20 is \$0.9045. Can an arbitrageur profit from this situation? W

### Effects on a T-bond of decreasing market yields

A 10 year Corporate Bond is issued with a face value of \$100,000.00, paying interest of \$2,500.00 semi-annually. If market yields decrease shortly after the T-bond is issued, what happens to the bond's: A) Price B) Coupon Rate C) Yield to Maturity

### Impact of credit ratings on cost of capital

First Tennessee Utility Company faces increasing needs for capital. Fortunately, it has an Aa2 credit rating. The corporate tax rate is 36 percent. First Tennessee's treasurer is trying to determine the corporation's current weighted average cost of capital in order to assess the profitability of capital budgeting projects. Hist

### Chapter 16 (Block&#8722;Hirt: Foundations of Financial Management) Can you assist with Problem 16-6 in the attachment

6. Sanders & Co. pays a 12 percent coupon rate on debentures that are due in 20 years. The current yield to maturity on bonds of similar risk is 10 percent. The bonds are currently callable at \$1,060. The theoretical value of the bonds will be equal to the present value of the expected cash flow from the bonds. This is the norma

### Present Value of Two Bonds

I am using Excel to solve this one with the PV function. I am thinking that there is no difference in the current market prices for these, but I am not sure how to explain why. I believe it is because they have coupons and the interest is not compounding. Thanks Assume that McDonald's and Burger King have similar \$1,000

### Bond

Explain why the relationship between a bond's yield and its coupon rate determines whether a bond will be price at par, at a premium or at a discount

### Current yields on different bonds

1.Difference between the current yields on different bonds can be explained by their relative riskiness and different terms to maturity. Discuss. 2. Although the market price of long term bond is much more sensitive to changes in market interest rate than the market price of short term bonds, it is not obvious that an individ

### interest payments do the bond holders receive each year

Can you help me get started with this assignment? A corporate bond for \$1000 carries a coupon rate of 8%, has a yield to maturity of 10% (which could also be called the market rate of interest) and has three years until maturity. A. What interest payments do the bond holders receive each year in dollars? B. Assuming ann

### David Ortiz Motors has a target capital structure of 40 percent debt and 60 percent equity.

David Ortiz Motors has a target capital structure of 40 percent debt and 60 percent equity. The yield to maturity on the company's outstanding bonds is 9 percent, and the company's tax rate is 40 percent. Ortiz's CFO has calculated the company's WACC as 9.96 percent. What is the company's cost of equity capital?

### invest in stocks or bonds that pay dividends

Discuss two to three reasons that people invest in stocks or bonds that pay dividends. On the other side of the coin list two to three reasons that people might not want to invest in companies or bonds that pay high dividends.

### What are the firm's after tax cost of debt, cost of preferred stock, cost of a new issue of common stock, cost of retained earnings, and the weighted average cost of capital (up to the point when retained earnings are exhausted and after all retained earnings are exhausted)?

A firm has determined its optimal capital structure, which is comprised of the following sources and target market value proportions: Source of capital target market proportions Long term debt 30% Preferred stock 5 Common stock equity 65 Debt: The firm can sell a 20 yea

### What would you pay for a bond...

What would you pay for a bond that pays an annual coupon of \$35, has a face value of \$1,000, matures in 7 years, and has a yield to maturity (YTM) of 8%?

### Bond Valuation..

What is the market value of a bond that will pay a total of forty semiannual coupons of \$50 each over the remainder of its life? Assume the bond has a \$1,000 face value and an 8% yield to maturity (YTM).

### After-tax rates of return

Compare the after-tax rates of return for a corporate investor from the following two investments: A twenty-year, corporate bond that sells for par and offers a 9% coupon versus an investment in preferred stock that sells for \$40.00 per share and pays a \$2.40 dividend. The corporation has a 35% tax rate.

### Bonds

What is the impact of an increase in the prevailing interest rate on the valuation of a bond? Are there other factors that also effect corporate bonds?

### Bond purchase decision

You are considering investing in a security that matures in 10 years with a par value of \$1,000. During the first five years, the security has an 8 percent coupon with quarterly payments (i.e., you receive \$20 a quarter for the first 20 quarters). During the remaining five years the security has a 10 percent coupon with quarterl

### Bond valuation : key information

Why is it necessary to value a bond in terms of today's dollars? What is the impact of an increase in the prevailing interest rate on the valuation of a bond? What are some factors that affect the value of a corporate bond?

### Investment in Bonds

Tom Jones is considering investing in a bond currently selling for \$8785.07. The bond has 4 years to maturity, a \$10,000 face value, and 8% coupon rate. The next annual interest payment is due 1 year from today. The appropriate discount rate for investments of similar risk is 10%. a) Calculate the intrinsic value of the bo

### Homework help

To help strengthen my skills Weighted average cost of capital EXAMPLE OF SETUP FOR PROBLEM 18: (1) Cost (after-tax) (2) Weights (3) Weighted Cost Debt Kd Preferred stock

### Explain the concept of yield to maturity

A co-worker of yours was discussing her investments with a broker. Your coworker was confused because she has purchased a 10% bond, but the broker kept repeating it had a 9% yield to maturity. Explain the concept of yield to maturity to your coworker.

### Corporate Finance

Turn your focus to valuing the firm's stock and bonds. The CFO likes to use the dividend discount model to value the firm's stock and the present value formula to value bonds. With that in mind, you decide to put an Excel spreadsheet together to value the firm's stock and bonds. The company's stock trades for US\$30 per share

### Bond's Yield to Maturity and Annual Coupon Payments

A bond with a \$1,000 face value and 3 years remaining to maturity. It currently sells for \$949.37 and makes annual coupon payments at a rate of 7% (that is, it pays \$70 in interest each year). The first interest payment is due one year from today. What is this bond's yield to maturity?

### What is the current price of each bond? b) If the market interest rate suddenly rises to 14% per year (effective annual yield), what will be the price of each of these bonds? Calculate the price and duration of each bond if the market interest rate is 10% per annum (effective annual yield).

1) Consider three zero coupon \$1000 face value bonds. Bond A matures 1 year from today. Bond B matures 5 years from today. Bond C matures 10 years from today. The current market interest rate is 11% per year (effective annual yield). a) What is the current price of each bond? b) If the market interest rate suddenly rises t

### Determine its cost of debt if it does not have publicly traded bonds

1. Describe how a company would determine its cost of debt if it does not have publicly traded bonds. 2. Where do readers ordinarily expect to find conclusions and recommendations in a financial report?

### Mid-term review questions

1. Calculate the current price per share for Cali Corporation given the following projections for the coming year: Sales=10,000 units Sales price per unit= \$10 Variable cost per unit= \$5 Fixed costs= \$10,000 Bonds outstanding= \$15,000 Interest rate on outstanding bonds= 8% Tax rate= 40% Dividend payout ratio= 60% Expe

### Corporate bonds, Earnings and Dividends

1. A 10-year Corporate bond is issued with a face value of \$100,000, paying interest of \$2,500 semi-annually. If market yields decrease shortly after the T-bond is issued, what happens to the bond's: a. price? b. coupon rate? c. yield to maturity? 2. Company ABC's earnings and dividends will grow at 0.5% monthly d

### Suppose the December CBOT treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1 percentage point, what is the gain or loss on the futures contract (assume \$1,000 par value)?

Suppose the December CBOT treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1 percentage point, what is the gain or loss on the futures contract (assume \$1,000 par value)? A. Loss of \$78, B. Gain of \$78, C. Loss of \$145, D. Gain of \$145, or E. None of the above