The Nickelodeon Manufacturing Co.
Not what you're looking for?
The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest semi-annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return on bonds is 10%, what is the current price of:
a) the bonds with 3 years to maturity?
b) the bonds with 10 years to maturity?
c) Explain the relationship between the number of years until a bond matures and its price.
d) Explain the relationships between interest rates and the price of bonds as it relates to (i) premium (ii) Par and (iii) Discount.
Purchase this Solution
Solution Summary
This solution is comprised of a detailed explanation to compute the current price of the bonds with 3 years to maturity and the bonds with 10 years to maturity, explain the relationship between the number of years until a bond matures and its price, and explain the relationships between interest rates and the price of bonds as it relates to (i) premium (ii) Par and (iii) Discount.
Solution Preview
The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest semi-annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return on bonds is 10%, what is the current price of:
a) the bonds with 3 years to maturity?
We need to calculate how much the bonds have been issued by using the formula as follows: -
where B is the issued price/current price
...
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.