A bond has the following features 10 percent • Coupon rate of interest (paid annually ....

Question

Question

A bond has the following features 10 percent • Coupon rate of interest (paid annually . Principal: $1,000 • Term to maturity:

a. What will the holder receive when the bond matures? -Select- b. -Select- interest on comparable debt is 8 percent, what sh

at will the holder receive when the bond matures? ent -Select- b. If the current rate of interest on comparable debt is 8 per

of interest on comparable debt is 8 percent, what shor Fion. Round your answer to the nearest dollar. e firm to call this bon

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

a. Principal

b. Price of the bond = 1000 *10% * PVAF ( 8% , 9) + 1000 * PVF (8% ,9)

= 100 * 6.247 + 1000 *0.500

= 1125 (rounded off)

c. Yes, since it is selling at a premium

d. Amount to be set aside = 120,000,000 / 6.247 = 19,209,220

Add a comment

Answer 2

Similar Homework Help Questions

A high-yield bond has the following features: __________________________________________________ Principal amount: $1,000 Interest rate (the coupon): 11.50%...

A high-yield bond has the following features: __________________________________________________ Principal amount: $1,000 Interest rate (the coupon): 11.50% Maturity: 10 years Sinking fund: None Call feature: After two years Call penalty: One year’s interest ___________________________________________________ a.) If comparable yields are 12 percent, what should be the price of this bond? b.) Would you expect the firm to call the bond if yields are 12 percent? c.) If comparable yields are 8 percent, what should be the price of the bond? d.) Would...
Bond A has the following terms • Coupon rate of interest (paid annually) 12 percent •...

Bond A has the following terms • Coupon rate of interest (paid annually) 12 percent • Principal: $1,000 • Term to maturity Tes year Bond Bhes the following terms 6 percent Coupon rate of interest Cosid annual - Principal: $1,000 - Omat Ten year bond of interest rate is 12 percent Use Appendix and Anpendio to answer the question. Round your answers to the nearest dollar . What should be the price for Price of bond A Pnce of bond...
A $1,000 bond has a coupon of 9 percent and matures after eight years. Assume that...

A $1,000 bond has a coupon of 9 percent and matures after eight years. Assume that the bond pays interest annually. What would be the bond's price if comparable debt yields 10 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ What would be the price if comparable debt yields 10 percent and the bond matures after four years? Use Appendix B and Appendix D to answer the question. Round...

A bond that matures in 12 years has a $1,000 par value. The annual coupon interest rate is 11 percent and the market's...

A bond that matures in 12 years has a $1,000 par value. The annual coupon interest rate is 11 percent and the market's required yield to maturity on a comparable-risk bond is 17 percent. What would be the value of this bond if it paid interest annually_____? What would be the value of this bond if it paid interest semiannually_____? a. The value of this bond if it paid interest annually would be $nothingm. (Round to the nearest cent.)
A $1,000 bond has a 7.5 percent coupon and matures after nine years. If current interest...

A $1,000 bond has a 7.5 percent coupon and matures after nine years. If current interest rates are 9 percent, what should be the price of the bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ If after five years interest rates are still 9 percent, what should be the price of the bond? Use Appendix B and Appendix D to answer the...
What is the market price of a $1,000, 8 percent bond - paying interest semi-annually -...

What is the market price of a $1,000, 8 percent bond - paying interest semi-annually - if comparable market interest rates drop to 6 percent and the bond matures in 15 years? Is the answer $1,194?

Your broker offers to sell for $1,250 a AAA-rated bond with a coupon rate of 8...

Your broker offers to sell for $1,250 a AAA-rated bond with a coupon rate of 8 percent and a maturity of ten years. Given that the interest rate on comparable debt is 5 percent, calculate the bond's price. Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ Is your broker fairly pricing the bond? , so the bond be purchased.
A bond that matures in 13 years has a $1000 par value. The annual coupon interest...

A bond that matures in 13 years has a $1000 par value. The annual coupon interest rate is 9 percent and the market's required yield to maturity on a comparable-risk bond is 12 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? a. The value of this bond if it paid interest annually would be $ nothing. (Round to the nearest...
Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells...

Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells for $1,318. What's the bond's yield to maturity? o o 5.36% 5.68% o 6.75% o 7.85% A 10-year corporate bond has an annual coupon payment of 8%. The bond is currently selling at par ($1.000). Which of the following statement is NOT correct? The bond's yield to maturity is 8%. The bond's current yield is 8%. If the bond's yield to maturity remains constant,...

(Bond valuation) Hamilton, Inc. bonds have a coupon rate of 8 percent. The interest is paid semiannually, and the b...

(Bond valuation) Hamilton, Inc. bonds have a coupon rate of 8 percent. The interest is paid semiannually, and the bonds mature in 14 years. Their par value is $1,000 If your required rate of return is 15 percent, what is the value of the bond? What is the value if the interest is paid annually? a. If the interest is paid semiannually, the value of the bond is $ 594.93 (Round to the nearest cont.) b. If the interest is...

A bond has the following features 10 percent • Coupon rate of interest (paid annually ....

Homework Answers

Add Answer to:
A bond has the following features 10 percent • Coupon rate of interest (paid annually ....

Post as a guest

Earn Coins

A high-yield bond has the following features: __________________________________________________ Principal amount: $1,000 Interest rate (the coupon): 11.50%...

Bond A has the following terms • Coupon rate of interest (paid annually) 12 percent •...

A $1,000 bond has a coupon of 9 percent and matures after eight years. Assume that...

A bond that matures in 12 years has a $1,000 par value. The annual coupon interest rate is 11 percent and the market's...

A $1,000 bond has a 7.5 percent coupon and matures after nine years. If current interest...

What is the market price of a $1,000, 8 percent bond - paying interest semi-annually -...

Your broker offers to sell for $1,250 a AAA-rated bond with a coupon rate of 8...

A bond that matures in 13 years has a $1000 par value. The annual coupon interest...

Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells...

(Bond valuation) Hamilton, Inc. bonds have a coupon rate of 8 percent. The interest is paid semiannually, and the b...

A bond has the following features 10 percent • Coupon rate of interest (paid annually ....

Homework Answers

Add Answer to: A bond has the following features 10 percent • Coupon rate of interest (paid annually ....

Post as a guest

Earn Coins

Add Answer to:
A bond has the following features 10 percent • Coupon rate of interest (paid annually ....