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# Bond Valuation

### How changes in the number of years to maturity affect bond prices

Have 2 bonds x and y (both make annual payments) bond x is a premium bond , pays a 10% coupon, has a ytm of 5 % and 17 years to maturity. bond y is a discount bond, pays a 5% coupon, has a ytm of 10% and 17 years to maturity. i have to find out the value of the bonds 6 and 10 years from now :(if interest rates remain unchan

### Three problems on Stocks and Bonds: Calculate the required rate of return for Mercury Inc. What is the market risk premium? What is the bond's annual coupon rate?

1. Calculate the required rate of return for Mercury Inc., assuming that investors expect 5% rate of inflation in the future. The real risk-free rate is equal to 3% and the market risk premium is 5%. Mercury has a beta of 2.0, and its realized rate of return has averaged 15% over the last 5 years. 2. A stock has an expect

### Finance: Helen's Pottery, Hanebury Manufacturing, Maine Electric

1. Helen's Pottery Co.'s stock recently paid a \$1.50 dividend (D0 = \$1.50). This dividend is expected to grow by 15% for the next 3 years, and then grow forever at a constant rate, g. The current stock price is \$40.92. If ks (required rate of return) = 10%, at what constant rate is the stock expected to grow following Year 3?

### Measure risk using standard deviation and coefficient of variation.

Objective: Measure risk using standard deviation and coefficient of variation. You work for an large investment firm and recently wrote a position article on your firm's approach to investing for the small investor, titled "Investing is for the little guy". The article now appears on your company's website. It has, interesti

### Investment choices research equity investments

Create a scenario in which you have to make a decision between two investments. In order for you to decide which investments will be the most profitable you must calculate the time value of money. Use hypothetical investment dollars, interest rates, and terms to illustrate your problems and support your conclusions. Research

### STRIPS - BOND - Using Excel

Consider the data in the "example" sheet. (File attached). You are given the STRIP prices for March 29th 1996. You are to test whether the prices of STRIPS and that of Treasury notes are consistent. That is we are looking for mis-pricing and abitrage opportunities. There is a 6 and 1/4 Treasury note (pays 6.25% coupon semi-annu

### Co issued \$750,000 of 4%, 12-year bonds on 10/1/05 plus accrued interest at a time when the market rate of interest was 6%...

Co issued \$750,000 of 4%, 12-year bonds on 10/1/05 plus accrued interest at a time when the market rate of interest was 6%. The bonds have an authorized date of 8/1/05 and pay interest each 2/1 and 8/1. The effective-interest method is used to amortize any discount or premium. Compute the: 1) semi-annual interest payment

### Bond Amortization Authorization Date

Company issued \$1,500,000 of its 10%, 20-year bonds on their authorized date of 6/1/05. The bonds were issued at a price of \$1,796,893 to produce an effective yield of 8%. Interest payments are made twice per year, 6/1 and 12/1, with discounts and premiums being amortized using the effective interest method. Compute the 1

### HP 17B: compute payment, interest and yields

Can anybody tell me how to use an HP 17B to find yields? And can anybody tell me how to figure out monthly payments on a 17B for loans.....say 36 months, finance amount \$35,000, rate 7.25%? Can anybody tell me how to figure out an interest rate in general?

### Problems on Stocks, Bonds, and Capital Budgeting

I have 10 questions that I need help with. (See attached file for full problem description) --- 1. Suppose that an investor with a 5-year investment horizon is considering purchasing a 7-year 9% coupon bond selling at par value of \$1,000. The investor expects that she can reinvest the semi-annual coupon payments at an an

### Stocks and Bonds

(See attached file for full problem description) --- 1. Aero Company currently has net income of \$3 million and 1. million common shares outstanding which sell for \$20 per share. Aero has decided to issue new stock to raise \$4,000,000 to expand its operations. Aero's investment banker will sell the new shares for \$18 per share

### Interest Rate on AAl Public Utility Bond

A previously issued Aal, 20-year industrial bond provides a return on-fourth higher than the prime interest rate assumed to be at 8%. Previously issued public utility bonds provide a yield of three-fourths of a percentage point higher than previously issued industrial bonds of equal quality. Finally, new issues of AAl public u

### Finance: Determining Bond Value

The Southeast Investment Fund buys 70 bonds of the Hilary Bakery Corporation through its broker. The bonds pay 9% annual interest. The yield to maturity (market rate of interest) is 12%. The bonds have a 25-year maturity. Using an assumption of semiannual interest payments: a. Compute the price of a bond (refer to "semia

### Finance - Bond Pricing

1. Bond Pricing. A 30-year maturity bond with face value \$1,000 makes annual coupon payments and has a coupon rate of 8 percent. What is the bond's yield to maturity if the bond is selling for a. \$900 b. \$1,000 c. \$1,100 2. Bond Pricing. Repeat the previous problem if the bond makes semiannual coupon payments.

### Bond Yield and Coupon Rate

1. Bond Yields. A bond with par value \$1,000 has a current yield of 7.5 percent and a coupon rate of 8 percent. What is the bond's price? 2. Coupon Rate. General Matter's outstanding bond issue has a coupon rate of 10 percent and a current yield of 9.6 percent, and it sells at a yield to maturity of 9.25 percent. The firm w

### Factors that affect the Valuation of Bonds

Explain how each of the following factors affect the valuation of a firm's bonds assuming that all other factors remain constant: 1) An increase in the general level of interest rates; 2) An increase in foreign competition; and 3) An increase in the firm's balance sheet debt.

### Company has outstanding an issue of 9% sinking-fund debentures which requires an annual sinking- fund payment of \$4 million per year....

Company has outstanding an issue of 9% sinking-fund debentures which requires an annual sinking- fund payment of \$4 million per year. This requirement maybe met either by 1-presenting to the trustee on or before a specified date each year cash in the amount of \$4 million; or else 2-instructing the trustee to enter the financi

### Present Value, Price Earning Ratio, Price of Bonds...

1. What is the present value of: (a) \$9,000 in 7 years at 8 percent 2. If you invest \$9,000 today , how much will you have : (a) In 2 years at 9 percent (d) In 25 years at 14 percent (compounded semi-annually) 3. How is valuation of any financial asset related to future cash flows? 4. What factors migh

### 3 Bond, Stock and Dividend Problems

1) Consider a bond paying an annual coupon of \$80 with a face value of \$1,000. Calculate the yield to maturity if the bond has: a. 20 years remaining to maturity and is priced at \$1,200 b. 10 years remaining to maturity and is priced at \$950 2) Consider the stock of Davidson Company, which will pay an annual dividend

### How do I find N for Bond

How do I find N (number of periods)for the bond? I think this is why I don't understand how to work out the problem. Please answer in xls and explain how to do this. It is January 2005, and you observe the following price quote: BK Corp. 5 1/2s28Dec Close 92 3/4 1. Suppose interest rates were to fall by 1.5% over the

### Finance Questions - Retirement Savings, Bond Yields, Coupon Rate

Question 1 Retirement Savings. You believe you will need to have saved \$500,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 6% per year, how much must you save each year until retirement to meet your retirement goal? Question 2 Bond Yields. An AT&T bond has 10 years until maturit

### Bond Pricing is considered.

Fill in the table for the following zero Coupon bonds. The face value of each bond is \$1,000. Price Maturity(years) Yield to Maturity \$300 30 ? \$300 ? 8% ? 10 10%

### Bond Valuation: required return and relationships

Quinn Electric Company has outstanding a bond issue that will mature to its \$1,000 par value in 12 years. The bond has a coupon rate of 15% and pays the interest annually. a) Find the value of the bond if the required return is (1) 10 percent, (2) 15 percent and (3) 17 percent. b) Use your findings in part a) to discuss the

### What is the price of the bond that pays annual interest?

A 6-year bond that pays 8% interest semiannually sells at par \$1000. Another 6-year bond of equal risk pays 8%interest annually. Both bonds are noncallable and have a face value of \$1000. What is the price of the bond that pays annual interest? The answer is \$992.64. How did they get it? Can you please show all work?

### CALCULATE EVA

CANNOT FIGURE OUT HOW TO APPROACH THE FOLLOWING QUESTIONS 1. Use the information below to calculate the EVA for the company. (Complete problem found in attachment) Net profit 3.5 million bonds 15000000 equity \$1 par 350000 retained earnings 250000 bond price 962 coupon (semi-annual) 55 years to maturi

### Accounting questions - 50 Multiple Choice Review Set

Please assist me with these questions (also attached): Instructions: Designate the best answer for each of the following questions. Questions 1 and 2 are based on the following information: Lake Company recently incurred the following costs: (1) Purchase price of land and dilapidated building \$250,000 (2) Real estate

### Time Value of Money, Bond & Stock Valuation, Risk & Return yield to maturity, price of a bond, present value, rate of return on investment, constant dividend growth model, stock's intrinsic value, expected return and standard deviation return, beta of stock, amortization, time value of money

For problems 1 - 4: It is January 2004, and you observe the following price quote: IBM 9 1/2s26 Close 98 1/4 1. What is today's annual yield to maturity for this bond? 2. Suppose interest rates were to remain constant. What would be the bond price on Jan. 1, 2006? 3. Suppose interest rates were to fall b

### Stock market declines, bond price, bond price elasticity, stock price, futures contract on Treasury bonds, Options dividend discount model,

1. Why most of the largest stock market declines have occurred in periods when interest rates increased substantially. Please use one of the stock valuation theories to explain this and also provide an intuitive explanation. 2. a). Find the price of a corporate bond maturing in 5 years that has a 5% coupon (annual

### Change in Price, Yield Due to Change in Interest Rates

A 10-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 bonds: A) coupon rate? B) price? C) yield to maturity?

### Uniform-price Auction verses Discriminatory Auction

1. Could you explain the difference between a uniform-price auction and a discriminatory auction? 2. And, why might you prefer to sell securities by one method rather than another? 3. Could you please elaborate on both questions?