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)? A. Loss of $78, B. Gain of $78, C. Loss of $145, D. Gain of $145, or E. None of the above
Assume interest payments are on an annual basis for questions 2,4,6, & 10. 2. Bond Value Midland oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is: a. 6 Percent b. 8 Percent c. 13 P
Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6%. What is the duration if the yield to maturity is 10%?
Dividends, Retain Earnings, Yield 1. Springsteen Music Company earned $820 million last year and paid out 20 percent of earnings in dividends. By how much did the company's retained earnings increase? With 100 million shares outstanding and a stock price of $50, what was the dividend yield? (Hint: First compute dividends pe
On April 1, 2003, Tatum Corporation issued $900,000 of 4-year, 8% bonds at face value plus accrued interest. The bonds were dated February 1, 2003, and pay interest semiannually on August 1 and February 1. Instructions Prepare all entries relating to the bond issue from the date of sale through the year end on December 31, 2
Explain why there is a difference between the carrying value and the current market value of the long-term debt. Assume the company has decided to retire all of its long-term debt for cash, prepare the journal entry to record this transaction. See the attached file.
Company A issued bonds at face value at a yield to maturity of 7%. With 8 years left to maturity, the company has troubles and yield to maturity on the bonds is up to 15%. What happened to the bond price? If the company can meet its coupon payments but expected to go bankrupt when the bond matures, and investors expect to r
1 Calculate the NPV and the IRR for the following project and state whether or not you would accept the new project. Required rate of return = 9% Current prime rate = 11% Initial outflow = $75,000 Inflows = $25,000 for years 1-3
5.17 bond sold for $1,065.12. the bond life is 9 years, yeild to maturity is 7 percent, what is the coupon rate? my answers 6.0 5.18 a. several years ago bonds were issued at face value yeild to maturity of 7 percent. with 8 years left until maturity company hits hard times. yield to maturity increases to 15%. what happ
A firm wants to issue a 5 year bond with a coupon rate of 8% yield to maturity of 6%, and interest payments made semi-annually. 1) At what price will the firm be able to sell the bond? 2) How many bonds must the firm sell to raise $1,000,000 in capital?
The CFO invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $33. What is the present value of all future benefits if a discount rate
Question: Large Industries bonds sell for $1,065.15. The bond life is 9 years, and the yield to maturity is 7 percent. What must be the coupon rate on the bonds? Please show work.
Provide a DETAILED presentation of the characteristics of the various EXTERNAL financing alternatives, including the advantages and disadvantages of each. Include a recommendation of which alternative (or combination of alternatives) should be used to finance the investment. Thanks for getting me started!!
Hooker Company sells $200,000 of ten-year, 8% bonds to yield 10% on January 1, 2005. The bonds pay interest annually on December 31. The bonds were sold at a discount of $24,578. The bond carrying value at the end of 2006 is
Hooker Company sells $200,000 of ten-year, 8% bonds to yield 10% on January 1, 2005. The bonds pay interest annually on December 31. The bonds were sold at a discount of $24,578. The bond interest expense for 2005 is
Wilson's Cabinet has bonds outstanding that mature in eight years, have a 6 percent coupon and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,020. What is the company's pre-tax cost of debt?
(See attached file for full problem description) --- 37. Amortizing Loan. Consider a 4-year amortizing loan. You borrow $1,000 initially, and repay it in four equal annual year-end payments. If the interest rate is 8 percent, show that the annual payment is $301.92 Fill in the following table, which shows how much of
(See attached file for full problem descriptions) Cox Media Corporation pay an 11 percent coupon rate on debentures that are due in 20 years. The current yield to maturity on bonds of similar risk is 8 percent. The bonds are currently callable at $1,060. The theoretical value of the bonds will be equal to the present va
Zero coupon bonds pay no interest. The only cash investors receive is the lump-sum principle payment at maturity. On January 1, 2005 The Ledge Inc. issued $250 million of zero coupon bonds at a market yield rate of 12%. The bonds mature in 20 years. Required 1. What was the January 1, 2005 issue price of these zero coupon
Discuss the relationship between interest rates and bond prices? When must the yield to maturity of a bond equal the current yield? What makes some bonds sell at a premium while others sell at a discount? Discuss how to use the tables to determine Present and Future Values, or Present Value and Future Annuities.
Hi, I cannot figure out how to answer the following (# 5). I take it I am supposed to answer # 4 to calculate # 5. # 5. Bond Pricing. If Circular File (see question 4) wants to issue a new 6-year bond at face value, what coupon rate must the bond offer? # 4. Bond Pricing. A 6-year Circular File bond pays interest of $80 a
What internal and external factors alter the value of a bond?
Reedsburg Associates is currently paying a dividend of $ 0.40 per share on earnings of $ 4 per share. Its stock is selling for $200 per share. Stocks of similar risk are priced to return 15%. What kind of return on equity could explain investors' willingness to pay a price equal to 50 times earnings on this stock?
Q1. An 8 percent annual coupon, noncallable bond has ten years until it matures and a yield to maturity of 9.1 percent. What should be the price of a 10-year noncallable bond of equal risk which pays an 8 percent semiannual coupon? Assume both bonds have a par value of $1,000. Q2. Oakdale Furniture Inc. has a beta coefficie
Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight debt with an 8 percent annual coupon. The second issue consisted of 20-year bonds with a 6 percent annual coupon and attached warrants. Both issues sold at their $1000 par values. What is the implied value of the warrants attached to
Midland Oil has $1,000 par value bonds outstanding at 11 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity is: a) 6 percent b) 8 percent c) 12 percent Harrison Ford Aoto Company has a $1,000 par value bond outstanding that pays 11
Uncle Sal, the family accountant is home from his failed attempt at striking it rich in Vegas and wants to make up for it by selling a few securities on the side. He has an offer that he is pitching to an older lady he calls "Granny." The offer is for a 30 year bond issued by an insurance company and paying 7% annual interest.
What is the price of a bond that matures in ten years, has a face value of 1,000 dollars (the principal to be repaid at the end of ten years) and a coupon rate of 7 percent and a current yield of 10 percent. Interest payments are semi-annual.
Since a corporation often has the right to call bonds at will, do you believe individuals should be able to demand repayment at any time they so desire? What are the relative advantages and disadvantages of issuing a long-term bond during a recession versus during a period of prosperity? What are the relative advantages an