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# Bond Valuation

### Bonds and EPS

A10-year Treasury bond is issued with a face value of \$1,000, paying interest of \$60 a year. If market yields increase shortly after the T-bond is issued, what happens to the bond's: coupon rate? price? yield to maturity? Company Z-prime is like Z in all respects save one: Its growth will stop after year 4. In year 5 an

### Expected change in the bonds value

A bank added a bond to its portfolio. The bond has a duration of 12.3 years and cost \$1109. Just after buying the bond, the bank discovered that the market interest rates are expected to rise from 8% to 8.75%. What is the expected change in the bonds value?

### What is the holding period return of the bond the common stock and the mutual fund?

The first investment is a bond which was purchased on May 10, 2005, and the purchase price was \$20,000 the bond was later sold on May 12, 2005, the sales proceeds were \$19,500. Interest on the bond from May 10, 2004 to May 12, 2005, was \$2,100. The second investment was Common stock which was purchased on December 16, 2004,

### Excel Calculation: bond YTM, current yield, yield to call; chart bond price vs interest rate

See attached file for full problem description. --- A 10-year 12 percent semiannual coupon bond, with a par value of \$1,000, may be called in 4 years at a call price of \$1,060. The bond sells for \$1,100. (Assume that the bond has just been issued), a. What is the bond's yield to m

### Treasury Bond

Lester purchases a 30-year Treasury bond today. This bond is selling at par (\$1,000) and has a coupon rate and yield to maturity of 7% (the bond pays interest annually). Now suppose that next week, a number of economic events occur which raises the rate of inflation. As a result the market rate of interest rises from 7% to 8%

### Calculate yield to maturity

I need help with this practice problem. I am going to have something very similar on an exam and can't figure out how to solve it. Bonds of Zello Corporation with a par value of \$1,000 sell for \$960, mature in 5 years, and have a 7% annual coupon rate paid semiannually. Calculate: a. Current yield. b. Yield to maturity (t

### Finance

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. 7 percent. b. 10 percent. c. 13 percent. Harrison Ford Auto Company has a \$1,000 par value bond outstanding that pays 11 percent inte

### Canadian Pacific Limited's debentures: determine YTM

Recently the high and low market prices of Canadian Pacific Limited's debentures (4 %) were \$790 and \$475 respectively. Determine the yield-to-maturity of one of these debentures if it was purchased under the following conditions: a. at the high market price b. at the low market price

### After tax Cost of debt: J & B, Inc. has \$5 million of debt outstanding with a coupon rate of 12 percent. Currently the yield to maturity on these bonds is 14 percent. If the firm's tax rate is 40 percent, what is cost of debt to J & B?

J & B, Inc. has \$5 million of debt outstanding with a coupon rate of 12 percent. Currently the yield to maturity on these bonds is 14 percent. If the firm's tax rate is 40 percent, what is cost of debt to J & b?

### Treasury Bond

Lester purchases a 30-year Treasury bond today. This bond is selling at par (\$1,000) and has a coupon rate and yield to maturity of 7% (the bond pays interest annually). Now suppose that next week, a number of economic events occur which raises the rate of inflation. As a result the market rate of interest rises from 7% to 8%

### Finance / bond yields

An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for \$1,100. a. What is the current yield on the bond? 80 / 1,100. = 7.2% b. What is the yield to maturity?

### Returns

You buy a 10% coupon bond 1 year ago for \$1,060 it has a 1,000 face value and this bond sells for \$1,085 today. 1. what is your total dollar return on this investment over the past year? 2. what is the total nominal rate of return over the past year? 3. if the inflation rate last year was 9%, what is your total rea

### FIN420

You have been asked to write a training document about the US Bond Market for use in the new employee training program. In your document, you must make sure to address each of the following: 1. the key players in the market; and the types of investments available to both individual investors and institutional investors, 2.

### Bond yields

12% coupon bonds, with 5 yrs left to maturity, bonds make annual payments, if the bond currentyly sells for \$1,107.93 what is the YTM? so i did: 12%=\$120 every year for 5 years 1,107.93=\$120 x [ 1-1 / (1+r)5] /r +1000/(1+r)5 ( the five is an exponent ) yet i do not know how to find the rate of return to finish up

### Price of a bond..

You just purchased a 15-year bond with an 11 percent annual coupon. The bond has a face value of \$1,000 and a current yield of 10 percent. Assuming that the yield to maturity of 9.7072 percent remains constant, what will be the price of the bond 1 year from now? \$1,000 \$1,064 \$1,097 \$1,100 \$1,150

### Tom Cruise Lines Maturing Bonds: Compute price of bond, PV

Tom Cruise Lines, Inc., issued bonds five years ago at \$1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 12 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return . . . . . . . . . . . . 3% Inflation prem

### Financial management

You just purchased a 15-year bond with an 11 percent annual coupon. The bond has a face value of \$1,000 and a current yield of 10 percent. Assuming that the yield to maturity of 9.7072 percent remains constant, what will be the price of the bond 1 year from now? \$1,000 \$1,064 \$1,097 \$1,100 \$1,150

### Calculate YTC and YTM for a 20 year coupon bond

What are the YTC and YTM for a 20-year, 8% Semiannual coupon bond selling for \$1,225, which can be called in 5 years for \$1,085? What is the effective YTC? Would you expect to earn YTM or YTC on this bond and why? Also, show the formula and entries on a financial calculator.

### Calculate value of a Coupon Bond

What is the value of a 20-year, 8% quarterly coupon bond, if Kd = 10%? Also, show the formula and entries in financial calculator.

### Value of Inflation for Annual Coupon

What is the value of a 20-year, 7% annual coupon bond if Kd equals 9%? What is the value if inflation increases 3%? What is the value if inflation decreases 3%? Show formulas and entries on a financial calculator.

### Finance Questions

1. You are considering an investment in the bonds of a company. The bonds which pay interest semiannunally, will mature in 8 8years and have coupon rates of 9.5%. Currently the bonds are selling for \$872. a) If your require rate of return is 11% for bond in the risk class, what is the highest price you would be willing to

### What is the difference between investing in stocks and bonds?

Bonds and stocks are very similar securities in many respects. For example, market value of both are determined by their expected future cash flows; and both show price sensitivity- some more, some less- to a set of common market factors. At the same time, some may even go further and state that when it comes to portfolio invest

### Bonds-duration, value

--- 1. Calculate the duration of a \$1000, 6% coupon bond with three years to maturity. Assume that all market interest rates are 7%. 2. Considered the bond in the previous question. Calculate the expected price change if interest rates drop to 6.75% using the duration approximation. Calculate the actual price change using di

### Present Value and Market Price of Bonds Question

A bond has been issued with a \$1,000 face value and a coupon rate of 7%. If the bond has a life of 30 years, pays annual coupons and the yield to maturity is 6.8% what will this bond sell for?

### Forward Price of a Contract on Zero-Coupon Bond

You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is \$1,000, and the 1-year and 11-year spot interest rates are 3 percent per annum and 8 percent per annum, respectively. Both of these interest rates are expressed as effective annual yields (EAYs).

### Bonds-Yield to maturity, Effective Annual Yield

ABC Industries bond has a 10 percent coupon rate and a \$1000 face value. Interest is paid semiannually, and the bond has 20 years to maturity. If investors require a 12 percent yield, what is the bond's value? What is the effective annual yield on the bond? XYZ corp. bond carries an 8 percent coupon, paid semiannually. The pa

### Cost of bonds - XYZ issued a new series of bonds on January 1, 1981.

How would set the following problem up in excel? I understand longhand YTM & Current yield but am lost in excel. XYZ issued a new series of bonds on January 1, 1981. The bonds were sold at \$1,000 par, have a 10% coupon, and mature in 2010. The coupon is semi-annual. What was the YTM of the bonds on January 1, 1981? What

### Rate of return on bonds

Rate of Return. A 2-year maturity bond with face value \$1,000 makes annual coupon payments of \$80 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is a. 6 percent b. 8 percent c. 10 percent Please provide in Excel format.

### Perpetual Bonds - KIC Inc.

KIC Inc. plans to issue \$5 million of perpetual bonds. THe fave value of each bond is \$1,000. The annual coupon bond is 12%. Market interest rates on one-year bonds are 11%. With eqaul probability, the long-term interest rates will be either 14% or 7% next year. Assume investors are risk-neutral. A. If the KIC bond are noncallab

### Can you please explain how to work these problems? Thanks!

1. Consider a \$1,000 par value bond with a 7% annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10%? 2. Assume that you plan to buy a share of XYZ stock today and to hold it for 2 years. Your