Question

Kintel, Inc., management wants to raise $1 million by issuing six-year zero coupon bonds with a face value of $1,000. The company’s investment banker states that investors would use an 12.38 percent discount rate to value such bonds. Assume semiannual coupon payments.

At what price would these bonds sell in the marketplace? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and Bond price to 2 decimal places, e.g. 15.25)

How many bonds would the firm have to issue to raise $1 million? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and number of bonds to 0 decimal places, e.g. 5,275.)

Nanotech, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 10.51 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 9.78 percent, how much will Nanotech pay to buy back its current outstanding bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.)

Marshall Company is issuing eight-year bonds with a coupon rate of 5.56 percent and semiannual coupon payments. If the current market rate for similar bonds is 9.27 percent.

What will be the bond price? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and bond price to 2 decimal places, e.g. 15.25.)

If company management wants to raise $1.25 million, how many bonds does the firm have to sell? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and number of bonds to 0 decimal places, e.g. 5,275.)

The International Publishing Group is raising $10 million by issuing 15-year bonds with a coupon rate of 10.11 percent. Coupon payments will be made annually. Investors buying the bonds today will earn a yield to maturity of 10.11 percent. At what price will the bonds sell in the marketplace? Explain. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.)

Four years ago, Lisa Stills bought six-year, 12.68 percent coupon bonds issued by the Fairways Corp. for $947.68. If she sells these bonds at the current price of $900.99, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. (Round answer to 2 decimal places, e.g. 15.25%.)

Answer 1

1)

00 7 $ 1,000 0% 8 2 $ 11 6 А A Par value (FV) B Coupon rate 9 C Number of compoundings per year 10 D=AxB/C Interest per period (PMT) E Number of years to maturity Number of compounding periods till 12 F = cxe maturity (NPER) 13 G Market rate of return/Required rate of Market rate of return/Required rate of 14 G/creturn per period (RATE) Bond price 16 12 12.38% m 6.19% PV(RATE,NPER, PMT, FV)*-1 15 17 Bond price $ 486.40 od =PV(6.19%,12,0,1000) *-1 19 20 No. of bonds 2,056 21 =1000000/486.4

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