Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had...
Homework Answers
Face Value = $1,000
Annual Coupon Rate = 15.00%
Annual Coupon = 15.00% * $1,000
Annual Coupon = $150
Time to Maturity = 25 years
Annual Required Return = Real Rate of Return + Inflation Premium
+ Risk Premium
Annual Required Return = 5.00% + 2.00% + 5.00%
Annual Required Return = 12.00%
Current Price = $150 * PVIFA(12.00%, 25) + $1,000 * PVIF(12.00%,
25)
Current Price = $150 * (1 - (1/1.12)^25) / 0.12 + $1,000 *
(1/1.12)^25
Current Price = $150 * 7.843139 + $1,000 * 0.058823
Current Price = $1,235.29
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Tom Cruise Lines Inc. issued bonds five years ago at $1,000
per bond. These bonds had...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium 3% 6 5 14% Total return Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: 5% Real rate of return Inflation premium Risk premium Total return 15% Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return 5 % Inflation premium 6 Risk premium 4 Total return 15 % Assume that five years later the inflation premium is only 2 percent and is...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return 3 % Inflation premium 6 Risk premium 5 Total return 14 % Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 38 6 5 148 Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 13 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return 4 % Inflation premium 5 Risk premium 4 Total return 13 % Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in...
Tom Cruise Lines Inc. Issued bonds five years ago at $1000 per bond. These bonds had...
Tom Cruise Lines Inc. Issued bonds five years ago at $1000 per bond. These bonds had a 25- year life when issued and the annual interest payment was then 13 percent. This return was in line with the required returns by bondholders at that point as described below 5 l rate of inflation premiun Risk preniun Total returs 139 eBlook Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required retum...
Tom Cruise lines Inc. issued bonds five years ago at $1000 per bond. These bonds had...
Tom Cruise lines Inc. issued bonds five years ago at $1000 per bond. These bonds had a 30 year life when issued and the annual interest payment was then 15%. This return was in line with the required returns by bondholders at that point as described below: Real rate of return: 5% Inflation premium: 5% Risk of premium 5% Total return: 15% Assume that five years later the inflation premium is only 3% and is appropriately reflected in the required...
13. Tom Cruise Lines, Inc., issued bonds five years ago at $1,000 per bond. These bonds...
13. Tom Cruise Lines, Inc., issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 12 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 3% 5 4 12% Assume that five years later the inflation premium is only 3 percent and is appro- priately reflected in...
Wilson Oil Company issued bonds five years ago at $1,000 per bond. These bonds had a...
Wilson Oil Company issued bonds five years ago at $1,000 per bond. These bonds had a 40-year life when issued and the annual interest payment was then 13 percent. This return was in line with the required returns by bondholders at that point in time as described below: Real rate of return 7 % Inflation premium 3 Risk premium 3 Total return 13 % Assume that 10 years later, due to bad publicity, the risk premium is now 8 percent...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium 3% 6 5 14% Total return Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: 5% Real rate of return Inflation premium Risk premium Total return 15% Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or...
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 38 6 5 148 Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required...
Tom Cruise Lines Inc. Issued bonds five years ago at $1000 per bond. These bonds had a 25- year life when issued and the annual interest payment was then 13 percent. This return was in line with the required returns by bondholders at that point as described below 5 l rate of inflation premiun Risk preniun Total returs 139 eBlook Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required retum...
13. Tom Cruise Lines, Inc., issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 12 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 3% 5 4 12% Assume that five years later the inflation premium is only 3 percent and is appro- priately reflected in...
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