Explore BrainMass

Bond Valuation

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

A Brief Debt Based on the Bond Ratings of Tom-Tom

1. Based on the bond ratings of Tom-Tom give a brief debt outlook of the company and a recommendation of buy, sell or neutral on the company's bonds. 2. Based on the bond ratings of Vodafone give a brief debt outlook of the company and a recommendation of buy, sell or neutral on the company's bonds.

Calculate the annual return on high yield junk bond.

You purchase a high-yield, junk bond for $1,000 that pays $140 annually. After buying the bond, yields decline and you are able to reinvest the interest at only 9 percent. You reinvest all the interest payments. How much will you have when the bond is retired after 12 years? What was the annual return you earned on this investm

Determining Value of Bond

Please explain in spreadsheet format. For this problem, consider a 6% coupon bond that matures in 20 years. What would be the value of this bond if interest rates fall to 5% the day after it is purchased? If interest rates fell to 5% after one year, what would the bond be worth at that point?

Calculating the expected return and standard deviation..

Consider the following probability distribution of returns for Alpha Corporation: Current Stock Price ($25): One Year ($) $35, $25, $20; Return R: 40%, 0%, -20%; Probability PR: 25%, 50%, 25%. (A). Compute the expected return for Alpha Corporation. (B). Compute the standard deviation of the return on Alpha Corporati

Calculate the bond price and YTM in the given case.

A three-year bond has 8.0% coupon rate and a face value of $1000. (A). If the yield to maturity on the bond is 10%, calculate the price of the bond assuming that the bond makes semi-annual coupon interest payments. (B). Assuming that this bond trades for $1,112, what is the YTM for this bond assuming that the bond mak

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

Foundation of Financial Management

You are given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000. AT&T Dell IBM Coupon 6.80 6.50 8.375% Maturity 05/15/2036 04/15/2038 11/01/2019 Frequency Semiannual Semiannual Semiannual Rating A A- A+ Calculate the value of the bond if

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