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Bond Valuation

Yield, Price, Callable, Risk, Discount, Value and Interest

Series of 5 multiple choice questions requiring use of financial calculator or Excel spreadsheet. 1. Three $1,000 face value bonds that mature in 10 years have the same level of risk, hence their YTMs are equal. Bond A has an 8% annual coupon, Bond B has a 10% annual coupon, and Bond C has a 12% annual coupon. Bond B sells at

Investments: Estimating the Price of a Bond

An investor has 2 bonds in his portfolio that have a face value of $1000 and pay a 10% annual coupon. Bond L matures in 15 years, while Bond S matures in 1 year. A. What will the value of each bond be if the going interest rate is 5%, 8%, 12%? Assume that only one more interest payment is to be made on Bond S at its maturi

Planning & Forecasting: PV of Bond YTM, After-Tax Cash Flow

1. What is the present value of $800 to be received at the end of eight years, assuming the following annual interest rate? a. 4 percent, discounted annually b. 8 percent, discounted annually c. 20 percent, discounted quarterly d. 0 percent 2. What would you be willing to pay for a $1,000 bond paying $70 interest at the

Problems in issuing 20-year bonds to pay employee salaries

Please help answer the following question. What are the problems caused by issuing 20-year bonds and using the proceeds to pay employees' salaries? Discuss the reason why long-term proceeds to pay employees' salaries is a bad idea.

Intermediate accounting - TOL Company - Securities reporting

Consider each of the following investments of the TOL Company in other companies: A. An investment in the preferred stock of a financial services company. The company is sound financially and the TOL Company invested for the dividend income. TOL Company has no plans to sell the stock anytime in the foreseeable future. B.

Is Dallas Instruments in compliance with bond covenants?

Dallas Instruments has a large bond issue whose covenants require: (1) that DI's interest coverage ratio exceeds 4.0; (2) that DI's ratio of tangible assets to longterm debt exceeds 1.50; and (3) that cumulative dividends and share repurchases not exceed 60% of cumulative earnings since the date of the issuance of the bo

Using Present Value Analysis Estimates

1. Using present value analysis estimate the number of zero coupon bonds(each with a face value of $1000) that will have to be offered to provide the $1 million Laurinburg Precision Engineering needs for expansion, if investors seek a yield of 10%. Assume interest will compound on a semiannual basis over the life of the five yea

Statistics and International Finance

Statistics 1. The general form of the multiple regression equation is the following: y = a + b1x1 + b2x2 + b3x3 + ..... + bnxn "a" is the intercept value defined as the value of y (dependent variable) if all independent variables are equal to zero "b1" is the sensitivity of y to variable x1. If x1 is varied by 1 unit, y

Corporate Finance: Value of the Stock

See the attached file. 7.11- Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and its dividend yield is 7%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work which leads you to expect that its earnings an

Tax law for real estate: Property held or used, vacation home rules

Admit it. You've watched that late-night infomercial describing how you can become a multimillionaire virtually overnight by leveraging your good looks and sparkling personality (and little else...) to invest in real estate. All joking aside, investing in real estate does present some opportunity for the creation of wealth, much

business finance current prices

i) Find the current price of 30 day commercial paper issued with a yield of 1.25% and with face value of $100,000. ii) Danny purchases a newly issued 4 year bond priced at $1015 with par value of $1000. It pays $100 interest yearly. What is the coupon rate, the current yield and the yield to maturity? iii) Danny also p

Bonds: Value, YTM, YTC, PV, market price, current yield, capital gain yield

Please calculate the attached problems and show all work: 1. Bond PV 1a A coupon bond promises annual interest payments based on a face value of $1,000 and a 9.00% coupon rate. The bond matures in 22 years. If the appropriate discount rate is 7.85%, what is the value of the bond? 2. Bond YTM 1a A coupon bond with annual

Bond Refunding Analysis for Mullet Technologies

Mullet Technologies is considering whether or not to refund a $75 million, 12% coupon, 30-year bond issue that was sold 5 years ago. It is amortizing $5 million of flotation costs on the 12% bonds over the issue's 30-year life. Muttlet's investment banks have indicated that the company could sell a new 25-year issue at an inte

High-Yield Securities and Risk for Stephanie

Stephanie is an investor who is willing and able to bear substantial risk in order to earn a higher return. As her financial planner, you believe that high-yield debt instruments would be an attractive alternative to stocks, whose prices have risen recently. High-yield securities offer larger returns but may involve substantial

Price of bonds, YTM, Current yield, portfolio's beta, return on stock

Practice Questions (5-1) Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds? (5-2) Wilson Wonder's bonds have 12 years remai

Bond Pricing

The current coupon rate, yield to maturity, and market price for the 10-year US Treasury bond are 2.625%, 3.33% and 94-02 respectively. Note, the price is expressed as a percentage of par (like other bonds) but the number after the dash represents 32nds of a percent. In other words, this bond is selling for 94 plus 2/32nds of a

Valuation, Interest rates, Constant growth, Preferred stock value

See attached file for proper formatting. Questions: (5-2) "Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices." Is this statement true or false? Explain. (5-3) The rate of return you would get i

Core deposits, bond values, yield, asset utiliization, ROE, ROA

I need a starting point on how to approach these questions. 1). How do core deposits differ from purchased funds 2). A bank is considering two securities: a 30-year Treasury bond yielding 5 percent. If the bank's tax rate is 30 percent, which bond offers the higher tax equivalent yield 3). A bank is considering an inve

Revision of the Equity Portfolio

Consider the information in the following table: a. What is the beta of this portfolio? b. What (specifically) would you do to bring this portfolio back to a target beta of 1.10? And also the following A seven-year bond with an 8 percent coupon rate has a yield to maturity of 9.15 percent. What is the current bond p

Current Yield vs Yield to Maturity

Explain the difference of a bond's Current Yield and its Yield to Maturity. Why would these measures be important to a bond investor? Find the Current Yield and the Yield to Maturity of a 20 year, nine percent coupon, $1000 par value bond currently trading in the market at $850.

Calculate which bond Lynn should purchase and why

Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1,000 par values and 11% coupon interest rates and pay annual interest. Bond A has exactly 5 years to maturity, and bond B has 15 years to maturity. a. Calculate the value of bond A if the required return is (1) 8%, (2) 11%, and (3)

Calculate bond price, current yield, YTM, discount vs premium

Assume that the Financial Management Corporation's $1,000-par-value bond had a 5.700% coupon, matured on May 15, 2017, had a current price quote of 97.708, and had a yield to maturity (YTM) of 6.034%. Given this information, answer the following questions. a. What was the dollar price of the bond? b. What is the bond's curr

Types of gains and losses; bonds; other

1) Nickel Inc. owns $400,000 of 10-year, 9% bonds as an investment on December 31, 2010. The bonds have 3 years remaining to maturity. The unamortized premium remaining on these bonds was $36,000. Nickel uses straight-line amortization. On May 1, 2011, $80,000 of the bonds were redeemed at 115. How much, and what type of gai