Homework Answers
Face Value = $1,600
Annual Coupon Rate = 6.00%
Annual Coupon = 6.00% * $1,600
Annual Coupon = $96
Time to Maturity = 3 years
Answer a.
Market Interest Rate = 6.00%
Price of Bond = $96 * PVIFA(6.00%, 3) + $1,600 * PVIF(6.00%,
3)
Price of Bond = $96 * (1 - (1/1.06)^3) / 0.06 + $1,600 /
1.06^3
Price of Bond = $1,600
The price of each of these bonds is $1,600 which means that the bonds sell at par.
Answer b.
Market Interest Rate = 7.00%
Price of Bond = $96 * PVIFA(7.00%, 3) + $1,600 * PVIF(7.00%,
3)
Price of Bond = $96 * (1 - (1/1.07)^3) / 0.07 + $1,600 /
1.07^3
Price of Bond = $1,558.01
The price of the ReNew bond changes to $1,558.01, which means that it sells at discount.
Answer c.
Market Interest Rate = 4.00%
Price of Bond = $96 * PVIFA(4.00%, 3) + $1,600 * PVIF(4.00%,
3)
Price of Bond = $96 * (1 - (1/1.04)^3) / 0.04 + $1,600 /
1.04^3
Price of Bond = $1,688.80
The new price of the bonds changes to $1,688.80, which means that the bond sells at premium.
Add Answer to:
Attempts: Keep the Highest: 13 5. Calculating the bond price ReNew Corporation raises funds to build...
5. Calculating the bond price ReNew Corporation raises funds to build renewable energy systems by issuing...
5. Calculating the bond price ReNew Corporation raises funds to build renewable energy systems by issuing 3-year bonds with a coupon rate of 6% and a face value of $1,600. Assume that the market interest rate for a 3-year bond issued by a firm like ReNew is currently the same as the coupon rate. The price of each of these bonds is____ , which means that the bonds sell at ___ Suppose that the market interest rate for bonds that...
(Decrease or Increase) Attempts: Keep the Highest: /4 5. The market for loanable funds and government...
(Decrease or Increase)
Attempts: Keep the Highest: /4 5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the...
Bond A pays $12,000 in 14 years. Bond B pays $12,000 in 28 years. (To keep...
Bond A pays $12,000 in 14 years. Bond B pays $12,000 in 28 years. (To keep things simple, assume these are zero-coupon bonds, which means the $12,000 is the only payment the bondholder receives.) Suppose the interest rate is 5 percent. Using the rule of 70, the value of Bond A is approximately and the value of Bond B is approximately Now suppose the interest rate increases to 10 percent. and the value of Bond B is approximately Using the...
Attempts: 2. Problem 7.02 Keep the Highest: V2 Click here to read the eBook: Bond Yields...
Attempts: 2. Problem 7.02 Keep the Highest: V2 Click here to read the eBook: Bond Yields Problem Walk-Through YIELD TO MATURITY AND FUTURE PRICE A bond has a $1,000 par value, 20 years to maturity, and a 8% annual coupon and sells for $1,110. a. What is its yield to maturity (YTM)? Round your answer to two decimal places. b. Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years...
5. How to read the bond market page The following is an excerpt from a bond price table. It shows data for bonds issued...
5. How to read the bond market page The following is an excerpt from a bond price table. It shows data for bonds issued by three companies: BB&B, BellWest, and Fruitopia. The face value of each bond is $100. Bonds Cur Yld Vol Close Net Chg 95 9.5 BB&B 6 1/2 13 BellWest 6 3/4 33 Fruitopia 10 1/2 09 -0.9 6.8 6.4 36 10.5 -0.25 9.7 210.8 The price of BellWest's bond is pays the lowest annual coupon. costs...
Back to Assignment Attempts: 30 Keep the Highest: 3/4 . The cost of retained earnings The cost of...
Back to Assignment Attempts: 30 Keep the Highest: 3/4 . The cost of retained earnings The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The current risk-free rate of return is 3.80% and the current market risk premium is 5.70%. Blue Hamster Manufacturing Inc. has a beta of 0.87. Using the Capital Asset Pricing Model (CAPM) approach, Blue Hamster's cost of equity is Fuzzy Button Clothing Company is closely held...
Suppose you are holding a 7 year Treasury bond with coupon rate of 5%. With expectations...
Suppose you are holding a 7 year Treasury bond with coupon rate of 5%. With expectations that economy will slow down the Federal Reserve cuts federal funds rate and other interest rates decrease. Newly issued bonds have lower coupon rates. Which is most likely to happen? A. increase market demand for your 5% coupon bond. B. decrease market demand for your 5% coupon bond. C. decrease market supply of your 5% coupon bond. D. increase market supply of your 5%...
I need hjelp on question 1. Bond Valuation Exercises: Question 1. GTF Corporation has 5 percent...
I need hjelp on question 1.
Bond Valuation Exercises: Question 1. GTF Corporation has 5 percent coupon bonds on the $1.000 and 10 years left to maturity. The bonds make annual in the market with a par of market interest rate on these bonds is 7 percent, what is the current terest payments. If the s 7 percent, what is the current bond price? Question 2. MTV Corporation has 7 MTV Corporation has 7 percent coupon bonds on the market...
1a. Calculate the price of a bond where the coupon rate is 5% (pays annually), the...
1a. Calculate the price of a bond where the coupon rate is 5% (pays annually), the market interest rate is 4%, and the life of the bond is 10 years. 1b. Suppose that you have an annual pay 7-year bond with a price of $1,100, paying a 4.5% coupon, with a face value of $1,000. What is the bond’s yield to maturity (YTM)? 1c. A bond sells for $900 today. Its coupon rate is 3%. The expected price in one...
Ch 07: Assignment - Bonds and Their Valuation 6. Bond yields and prices over time A...
Ch 07: Assignment - Bonds and Their Valuation 6. Bond yields and prices over time A bond Investor is analyzing the following annual coupon bonds: Annual Coupon Rate Issuing Company Johnson Incorporated Smith, LLC Irwin Corporation 6% 12% 9% Each bond has 10 years until maturity and the same level of risk. Their yield to maturity (TM) is 9%. Interest rates are assumed to remain constant over the next 10 years. BOND VALUE ISI 1200 1100 1 B YEARS TO...
(Decrease or Increase)
Attempts: Keep the Highest: /4 5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the...
Bond A pays $12,000 in 14 years. Bond B pays $12,000 in 28 years. (To keep things simple, assume these are zero-coupon bonds, which means the $12,000 is the only payment the bondholder receives.) Suppose the interest rate is 5 percent. Using the rule of 70, the value of Bond A is approximately and the value of Bond B is approximately Now suppose the interest rate increases to 10 percent. and the value of Bond B is approximately Using the...
Attempts: 2. Problem 7.02 Keep the Highest: V2 Click here to read the eBook: Bond Yields Problem Walk-Through YIELD TO MATURITY AND FUTURE PRICE A bond has a $1,000 par value, 20 years to maturity, and a 8% annual coupon and sells for $1,110. a. What is its yield to maturity (YTM)? Round your answer to two decimal places. b. Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years...
5. How to read the bond market page The following is an excerpt from a bond price table. It shows data for bonds issued by three companies: BB&B, BellWest, and Fruitopia. The face value of each bond is $100. Bonds Cur Yld Vol Close Net Chg 95 9.5 BB&B 6 1/2 13 BellWest 6 3/4 33 Fruitopia 10 1/2 09 -0.9 6.8 6.4 36 10.5 -0.25 9.7 210.8 The price of BellWest's bond is pays the lowest annual coupon. costs...
Back to Assignment Attempts: 30 Keep the Highest: 3/4 . The cost of retained earnings The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The current risk-free rate of return is 3.80% and the current market risk premium is 5.70%. Blue Hamster Manufacturing Inc. has a beta of 0.87. Using the Capital Asset Pricing Model (CAPM) approach, Blue Hamster's cost of equity is Fuzzy Button Clothing Company is closely held...
I need hjelp on question 1.
Bond Valuation Exercises: Question 1. GTF Corporation has 5 percent coupon bonds on the $1.000 and 10 years left to maturity. The bonds make annual in the market with a par of market interest rate on these bonds is 7 percent, what is the current terest payments. If the s 7 percent, what is the current bond price? Question 2. MTV Corporation has 7 MTV Corporation has 7 percent coupon bonds on the market...
Ch 07: Assignment - Bonds and Their Valuation 6. Bond yields and prices over time A bond Investor is analyzing the following annual coupon bonds: Annual Coupon Rate Issuing Company Johnson Incorporated Smith, LLC Irwin Corporation 6% 12% 9% Each bond has 10 years until maturity and the same level of risk. Their yield to maturity (TM) is 9%. Interest rates are assumed to remain constant over the next 10 years. BOND VALUE ISI 1200 1100 1 B YEARS TO...
Most questions answered within 3 hours.
-
How much must I invest today if I want to withdraw 1/3 of my
original investment...
asked 39 minutes ago -
What is meant by a “term premium”?
What can explain such a premium? Is it a...
asked 2 hours ago -
23. Which molecule has only covalent bonds? A. CO2 B. Al2O3 C.
Mg3N2
24. The octet...
asked 2 hours ago -
the
total pressure for a mixture of N2O4 and NO2 is 2.20 atm. If Kp=
7.10...
asked 2 hours ago -
Delaware Corp. prepared a master budget that included $22,385
for direct materials, $28,600 for direct labor,...
asked 2 hours ago -
For pesticide HCB (hexachlorobenzene), its logarithmic partition
coefficient log Kow is 5.6. What would be the...
asked 2 hours ago -
A chemist requires 0.422 mil Na2CO3 for a reaction. How many
grams does this correspond to?
asked 2 hours ago -
If the vapor pressure of carvone is approximately 9.4 torr at 99
°C, approximately how much...
asked 3 hours ago -
A juice bottling company is carrying out a test at 10%
significance that the mean population...
asked 3 hours ago -
What is the reflectivity (in percent) needed to keep water at a
temperature near its freezing...
asked 3 hours ago -
Suppose that the average surface temperature of Earth is 300K.
Assume this is uniform over its...
asked 3 hours ago -
Draw the condensed structural formula for alkenes and alkynes or
the line-angle structural formula for cycloalkenes...
asked 3 hours ago