Purchase Solution

Valuation of Corporate Zero-Coupon Bonds

Not what you're looking for?

Ask Custom Question

1.Valuation - corporate bond
A $1,000 corporate bond with 10 years to maturity pays a coupon of 8% (semi-annual) and the market required rate of return is a) 7.2% and b) 10%. What is the current selling price for a) and b)?

2.Valuation - options
The following information refers to a six-month call option on the stock of XYZ, Inc.
•Price of the underlying stock: $50.
•Strike price of the three-month call: $45.
•Market price of the option: $10.

a) What is the intrinsic value of the option?
b) What is the option's time premium at this price?

3.Valuation - zero-coupon bond
A U.S. Government bond with a face amount of $10,000 with 13 years to maturity is yielding 5.5%. What is the current selling price?

4.A share of stock is currently selling for $31.80. If the anticipated constant growth rate for dividends is 6% and investors are seeking a 16% return, what is the dividend just paid?

5.A $1000 value convertible bond with conversion price of $50. It sells for $1,120 despite the fact bond's coupon ate and the market rate are equal. The common stock acquired upon conversion is selling for $54 per share. What is the convertible bond's conversion premium?

Purchase this Solution

Solution Summary

The valuation of corporate zero-coupon bonds are provided. Strike price of the three-month calls are given.

Solution provided by:
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
Recent Feedback
  • "I've posted a similar question for another course. It's post 657940, and it's a practice problem that I'd like to use for the final exam. Your help will be greatly appreciated. "
  • "thank you!"
  • "Thank you again Jayant. You are super fast. "
  • "Thank you Jayant. You are appreciated. "
  • "Again, thank you Jayant. You are wonderful. "
Purchase this Solution

Free BrainMass Quizzes
Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Basics of corporate finance

These questions will test you on your knowledge of finance.