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Bond Valuation

Interest and Treasury Bond Problem

Given her evaluation of current economic conditions, Ima Nutt believes there is a 20 percent probability of recession, a 50 percent chance of continued steady growth, and a 30 percent probability of inflationary growth. For each possibility, Ima has developed an interest rate forecast for long-term Treasury bond Interest Rate

Coupon Rates, Coupon Yields and Maturity

A firm issues a bond at par value. Shortly thereafter, interest rates fall. If you calculated the coupon rate, coupon yield, and yield to maturity for this bond after the decline in interest rates, which of the three values would be highest and which would be lowest? Explain.

Relationship Between Bond Prices and Bond Yields

With interest rates at historic lows, you decide to invest in high yield corporate bonds. Fly-By-Night Inc., has a new 30 year bond issue that seems attractive. Each bond costs $100 and has a fixed coupon of $10, a yield of 10%. With $1000 in your pocket, you decide to buy 10 of these bonds. You buy them at original issue and

Par Value Bond

A firm issues a bond at par value. Shortly thereafter, interest rates fall. If you calculated the coupon rate, coupon yield, and yield to maturity for this bond after the decline in interest rates, which of the three value would be highest and which would be lowest? Explain.

Estimate the value of given bond.

BioMax Inc. offers an 8 percent coupon bond that has a $1,000 par value, semiannual coupon payments and 20 years of its original 25 years left to maturity. Which of the following statements is true if the market return on similar bonds is 10%? a. The bond will sell at a premium of $1,198 because the coupon rate is greater th

Process Followed by Bond Price

Suppose that x is the yield on a perpetual government bond that pays interest at the rate of 1$ per annum. Assume that x is expressed with continuous compounding, that interest is paid continuously on the bond, and that x follows the process: dx = a(x(0) - x) dt + sx dz Where a, x(0), and s are positive constants, and dz i

Finance

Determine how much that you would be willing to pay for a bond that pays a semi-annual coupon and has the following characteristics: (a) Annual Coupon Rateâ?"8%, Annual Yield to Maturityâ?"9%, and Number of Years to Maturityâ?"20. Determine the price that you would be willing to pay for a share of preferred stock that has

EXCEL Exercises

How long would it take you to obtain $1,000,000 if you saved $2,500 quarterly and were able to obtain a 7% rate of return per year? Calculate the current yield on a bond that has the following characteristics: (a) NPER: 30, (B) Price--$1,125, (c) Coupon Rate: 6%, (d) Market Rate of Interest: 4%. Calculate the Yield to Matu

Individual or component costs of capital

Do problem ST-1. Using your answers to ST rounded to the nearest percent, compute the NPV of a project that cost $10,000 and generates $3,000 a year for 4 years. This needs to be do for A, B, C, and D. Study Problem 1 (Individual or component costs of capital) Compute the cost for the following sources of financing: a. A

The Bradford Company: record bonds by Saxton-Bose 2011

The Bradford Company sold 12% bonds, dated January 1, with a face amount of $85 million on January 1, 2011 to Saxton-Bose Corporation. The bonds mature in 2020 (10 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and December 31. 1) Prepare the journal entry to

The Interest Rate of a Bond

A zero-coupon bond that will pay $1,000 in 12 years is selling today for $318.63. Calculate the bonds offered interest rate. (Do not round intermediate calculations. Round your answer to the nearest whole percent.) Interest rate __________ %

Computing After-tax Equivalent Yield

If a corporate bond paid 9 percent interest, and you are in the 28 percent income tax bracket, what rate would you have to earn on a general obligation municipal bond of equivalent risk and maturity in order to be equally well off? Given that municipal bonds are often not easily marketable, would you want to earn a higher or low

Sure Tea Co: What is the remaining maturity of these bonds?

Sure Tea Co. has issued 6.3% annual coupon bonds that are now selling at a yield to maturity of 9.2% and current yield of 8.7770%. What is the remaining maturity of these bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Remaining period = years

Computing the Current Yield of a Publicly-Traded Bond

Maturity Coupon Bid Price Asked Price Asked Yield, % 2012 May 15 1.375 101:05 101:06 0.78 2013 May 15 3.625 106:31 107:01 1.23 2014 May 15 4.75 111:22 111:23 1.70 2020 May 15 8.75 144:17 144:19 3.44 2025 Aug 15 6.875

Calculate the current yield and yield to maturity for a bond

A bond has 16 years until maturity, a coupon rate of 5.8%, and sells for $1,109. a. What is the current yield on the bond? (Round your answer to 2 decimal places.) Current yield % b. What is the yield to maturity? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Yield to mat

What is the current yield and the yield to maturity for a bond?

A bond has 16 years until maturity, a coupon rate of 5.8%, and sells for $1,109. a. What is the current yield on the bond? (Round your answer to 2 decimal places.) Current yield % b. What is the yield to maturity? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Yield to mat

Computing the Coupon Rate and Yield to Maturity

A 5-year Circular File bond pays interest of $60 annually and sells for $988. What are its coupon rate and yield to maturity? (Do not round intermediate calculations. Round "Coupon rate" to 1 decimal place and "Yield to maturity" to 2 decimal places.) Coupon rate % Yield to maturity %.

Bonds from AT&T, Dell, and IBM

Given the following data on bonds from AT&T, Dell, and IBM. Each bond has a par value of $1000. (see the attached file) Calculate the value of the bond if your required return is 5 percent on AT&T, 6.5 percent on Dell, and 8 percent on IBM. Determine the yield to maturity (YTM) on the bonds given the following prices.

Analyzing a Bond Portfolio

A porfolio consists of the following nine bonds: 1. Reynolds Amern 2. Donnelley RR 3. Altria Group 4. Alcoa Inc 5. Aetna Inc 6. KLA Tencor 7. Hospitality PRO 8. GE Capital 9. Sempra Energy Part A: 1. For each of the bonds listed above, find the coupon rate, payment date, rating, years to maturity, yields to call,

Market Trades a Default Free Zero Coupon Bond

The market trades a default-free zero coupon bond that pays $100.00 in one year. This bond trades at $94.34. Also traded is a coupon bond that pays a coupon of $4:00 after six months, and makes a final payment of $104:00 (the last coupon and the principal) in one year. This bond trades at $102:00. Moreover, a six month zero-coup

Financial Policy and Strategy

The contributors of capital and the respective share of the balance sheet for a company are this: 33.3% common stock with an expected return of 15% 33.3% preferred shareholders with a 9% expected return 33.3% bondholders with a yield to maturity (YTM) of 6% A corporate tax rate of 40% What is the weighted average cost

Estimate the cash price of a bond with a value

Suppose that 6 month, 12 month, 18 month, 24 month, and 30 month Zero rates are 4%, 4.2%, 4.4$, 4.6%, and 4.8% per annum with continuous compounding respectively. Estimate the cash price of a bond with a value of 100 that will mature in 30 month and pays a coupon of 4% per annum semiannually. The bond pays $2 in 6, 12, 18 and

Investors: short-term rates and matured bonds

What should investors do when rates are increasing short-term and matured bonds? When rates are falling, long-term bonds will have capital gains from market price increases, so what would be a defensive strategy? While many investors may devise low risk strategies and strategies to mitigate risks, upheavals can catch even