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Bond Valuation

Stocks and Bonds-Gulf Coast Fisheries

The common stock of Gulf Coast Fisheries currently sells for $72 per share. On the same date last year, the price of the stock was $68.50 per share. If Gulf Coast paid a $2 per share dividend during the year, what return did investors who owned the company's stock earn during the past year?

Yield to Maturity and Bonds Calculations

Find the yield to maturity of a 14 percent coupon rate, $1,000 par value bond priced at $1,160 if it has 16 years to maturity. Find the yield to call if the call can be made in four years at a price of $1,080?

Investor's risk aversion

Please help me understand these finance questions: 1) How is an investor's risk aversion reflected in a bond's maturity risk premium? 2) Would an increase in the volatility of long-term interest rates cause a bond investor to pay more or less for a non-callable bond that had high convexity? 3) If you purchase a callabl

The existence of a viable junk bond market means that firms can comfortably maintain higher degrees of leverage than they could prior to the development of this market. Do you agree or disagree? Justify your answer.

Because the weighted average given in Equation (17.4) in your text is always a correct measure of a required return, why do firms not create securities to finance each project and offer them in the capital market in order to accurately determine the required return for the project The development of the new issue junk bond ma

Article Review: Who Issues Bonds?

The Article Review layout is simple and consists the body of the review containing three sections with the following headings: 1. Overview/Summary 2. Opinion/Analysis 3. Relevance to Financial Management. Your reference sources are limited to the Wall Street Journal, Financial Times, New York Times, Barron's, Investors'

Bond price, current yield, YTM, ROI

1.     You are considering the purchase of a 7%, 15-year bond that pays interest annually. If the yield to maturity on the bond is 6%, what price will you pay?  Round your answer to the nearest cent.  2.     What is the current yield on the bond from part a? Round your answer to the nearest tenth

Bond issuance price

Have a bond problem question: On January 1, 20D a well known Company issued $5million of 10-year bonds at a 10% stated interest rate to be paid semiannually. The task is to calculate the issuance price if the market rate of interest is 12%.

Financial Management

1. A bond which has a yield to maturity greater than its coupon interest rate will sell for a price a. below par. b. at par. c. above par. d. what is equal to the face value of the bond plus the value of all interest payments. 2. If you were to put $1,000 in the bank at 6% interest each year for the next ten years,

Cost of Debt and Preferred Stock

Franklin Mining has 15 yr, 8% annual coupon bond outstanding. Bond has a current market price of $885.54 and a face value of $1,000. If Franklin's marginal tax rate is 35% what is its relevant after-tax component cost of debt, rd (1-T)? 6.15% 9.46% 6.76% 6.40% 5.60% I need to understand the detailed steps on how to appro

Examining the reasoning behind issuing bonds

Why do companies issue bonds? Would you rather buy a bond at a discount or a premium rate? Why? What is the determining factor of whether a bond is sold at a discount, face value, or premium? What is the straight-line method of amortizing discount and premium on bonds payable? Provide an explanation of the process.

WACC & Capital Structure

Please help me calculate WACC and the three methods of calculating the cost of equity. Assist with calculating it on the 2011 10k totals for Exxon Mobil, Chevron and Conoco-Phillips.

Bond Value: Issuing a Tax-Exempt Bond

A Hospital plans on issuing a tax-exempt bond at 6% coupon annual rate that matures at 30 years, the the par value of the bond is $1,000. If required market rates are 6 percent, what is the value of the bond? If required market rates fall to 12 percent what is the value of the bond? At what required market rate (3,6, or 1


1. Over the past 5 years, NBA's common stock earnings per share have grown from $0.62 to $0.91. If an investor is NBA stock is assumed to have a required rate of return of 14%, what is the current value of NBA if its current dividend is 0.12? Assume EPS will continue to grow at a constant rate. 2. Morton Industries' common st

Evaluate the Activities & Impact of the U.S. Treasury Department

When federal, state, and local governments issue securities, what key roles do they play in financial markets, particularly in the bond and mortgage markets, and how do they affect you? Describe these financial markets in which goverments participate and how they function. What securities have federal, state, and local governmen

Finance Management

1. (Bond valuation) National Steel 15-year, $1,000 par value bonds pay 8 percent interest annually. The market price of the bonds is $1,085, and your required rate of return is 10 percent. a. Compute the bond's expected rate of return. b. Determine the value of the bond to you, given your required rate of return. c. Should yo

Using Straight-Line Amortization to Compute the Gain/Loss

Hurst, Incorporated sold its 8% bonds with a maturity value of $3,000,000 on August 1, 2009 for $2,946,000. At the time of the sale, the bonds had 5 years until they reached maturity. Interest on the bonds is payable semiannually on August 1 and February 1. The bonds are callable at 104 at any time after August 1, 2011. By Octob

Basis point spread of two securities with different maturities

6. The spread between ACME corporation's note with a coupon of 6.5%, seven-year remaining term, and selling for 101-3/8 and ACME corporation's debenture with a coupon of 9.5%, 18-year remaining term and selling for 98-3/4 is a. 338 basis points. b. 339 basis points. c. 340 basis points. d. 341 basis points. 8. The asking

Addresses the issuance of general obligation bonds

Assume that Kelly County issues $2,000,000 in general obligation bonds to build a new fire station and $8,000,000 in revenue bonds to finance the upgrade of their water treatment facility. How will these transactions affect the funds of the county? a. Financial assets of the Capital Projects Fund will increase by $10,00


A firm has an outstanding bond issue with an annual coupon rate of 7 percent and 4 years remaining to maturity. The par value is $1000 and the bond pays annual interest. What is the current value of the bond if bond market conditions justify a 14 percent required rate of return on bonds in this risk category? What is the current

Rate of return

A firm plans to issue bonds with a par value of $1,000 and 20 years to maturity. The bonds have a 5.5% annual coupon. What is the maximum an informed investor would pay for these bonds if the investor's required rate of return of 5%?

Bonds and Yield to Call

A 7.25% coupon bond with 25 years left to maturity can be called in 5 years. The call premium is one year of coupon payments (i.e. when the bond is recalled 5 years from now, you receive a face value of $1,072.50). It is offered for sale at $1,066.24. What is the yield to call of the bond? (Assume that interest payments are paid

Bond yields

Choosing between bonds 4. 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? b. Which bond should be

Calculating YTM and price of a bond

The Pennington Corporation issued a new series of bonds on January 1, 1987. The bonds were sold at par ($1,000), had a 12% coupon, and matured in 30 years on December 31, 2016. Coupon payments are made semiannually. (on June 30 and December 31) a. What was the YTM on the date the bonds were issued? b. What was the price of

High Yield Bond Questions

1. Are High Yield (formerly referred to as "Junk") Bonds necessarily a bad investment? On what would this depend? 2. What is the financial impact on a company when their debt rating is viewed as "High Yield"? 3. What specific steps must a firm undertake to improve their credit rating under the current rating system?

Corporate Finance - Bonds

1. Security: AAA AA A BBB BB Yield (%) 6.2 6.4 6.7 7.0 7.5 Consolidated Insurance wants to raise $35 million in order to build a new headquarters. The company will fund this by issuing 10-year bonds with a face value of $1,000 and a coupon rating of 6.5%, paid semiannually. The above table shows the yield to maturit

Steps to Estimating the Fair Value of a Bond

Find the value of a semiannual coupon bond with a face value of $1000, with an annual coupon rate of 15 percent, and with 24 years remaining until maturity, and with an annual interest rate (Yield to Maturity) of 17.48 percent. Of the options below, which one is correct?

Term Premium calculation

How is premium definition used in the example below? What credit rates, bonds or being used? "Valuation measures show government debt has become more expensive. The term premium, a model created by economists at the Fed, increased to negative 0.39 percent yesterday after reaching negative 0.26 percent on March 19, the least e

Retiring Debt Bond Issues

On January 1, 2011, Tango-In-The-Night, Inc., issued $75 million of bonds with a 9% coupon interest rate. The bonds mature in 10 years and pay interest semiannually on June 30 and December 31 of each year. The market rate of interest on January 1, 2011, for bonds of this type was 11%. the company closes its books on December 3

Expected Return and Pay Out

1. Company A pays a dividend of $2.40 and its stock price is expected to remain constant at $16. What rate of return will an investor enjoy by owning the stock? 2. Company B pays a dividend of $12. Its stock is expected to grow in price at a rate of 4%. How much should you pay for the stock if your expected rate of return is

corporate bond portfolio

You earned 9% percent on your corporate bond portfolio this year and you are in a 18 percent federal tax bracket. If over your holding period, inflation was 4 percent, your real after-tax rate of return was?