ZuoTi.Pro
Question

par value bonds

1.A 30-year, $1,000 par value bond has a 9.5% annual payment coupon. The bond currently sells for $875. If the yield to maturity remains at its current rate, what willthe price be 9 years from now?
2.Knapp Bros, LLC is planning to issue new 20-year bonds. The current plan is to make the bonds non-callable, but this may be changed. If the bonds are made callableafter 7 years at a 7% call premium, how would this affect their required rate of return?

Step a:

Calculate the Bond Yield if held to Maturity YTM = #NUM!
Number of Payments N = 1
Present Value of the Bond (the price the bond should sell for) PV = $875.00
Coupon Payments (Annual Coupon Interest Rate x Bond Par Value) PMT = $95.00
Par Value if Bond is held to Maturity par value = $1,000.00
Annual Coupon Interest Rate I = 10.93%

Step b:

Find the Present Value of the Bond (the price the bond should sell for) PV = $0.00
Number of Payments Nine Years from Today N =
Future Value of the Bond if Held to Maturity FV =
Coupon Payments PMT =
Yield to Maturity from Step 1 YTM =


Problem 2

Assumptions (not given in the exercise):
Par Value if Bond is held to Maturity FV = $1,000.00
Annual Coupon Interest Rate I = 5.00%
Yield to Maturity YTM = 6.50%

Coupon Payments (Coupon interest x Bond Par Value) PMT = $0.00
Years to Maturity N = 1
Years to Call YTC = 1
Call Premium % CP = 0.00%

Present Value of the Bond (the price the bond should sell for) -$938.97

Bond Yield Calculations
Current Yield 0.00%
Yield to Maturity 6.50%
Yield to Call 6.50%

http://www.arachnoid.com/lutusp/finance.html

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
Knapp Bros, LLC is planning to issue new 20-year bonds. The current plan is to make the bonds non-callable, but this may be changed. If the bonds are madecallable after 7 years at a 7% call premium, how would this affect their required rate of return?
answered by: tibby
0 0
Add a comment
Know the answer?
Add Answer to:
par value bonds
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 5. A firm's bonds have a maturity of 8 years with a $1,000 par value,, have...

    5. A firm's bonds have a maturity of 8 years with a $1,000 par value,, have an 11% coupon rate, are callable in 4 years at $1,154 and currently sell at a price of $1,283.09. Suppose the coupon payments are made quarterly a) What is the yield to maturity? N= 1/YR= 1/YR= PMT= PMT= FV= FV= PV= PV= Yield to maturity= b) What is the yield to call? N= I/YR PMT= FV= PV= Yield to call

  • 7.4 Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to...

    7.4 Unlike the coupon interest rate, which is fixed, a bond's yield varies from day to day depending on market conditions. To be most useful, it should give us an estimate of the rate of return an investor would earn if that investor purchased the bond today and held it for its remaining life. There are three different yield calculations: Current yield, yield to maturity, and yield to call. A bond's current yield is calculated as the annual interest payment...

  • 1. (Holding Period Yield) A few years ago, XYZ Corp. issued a bond with a par...

    1. (Holding Period Yield) A few years ago, XYZ Corp. issued a bond with a par value of $1000 and annual coupon rate of 7 percent paid SEMIANNUALLY (2 times per year). At present (time 0), the bond has 20 years to maturity. a. If the yield to maturity (YTM) on this bond is now 10 percent, what is the current price of the bond (at time 0)? In your answer, please indicate your entries: N = I/Y= FV =...

  • 5a FYI bonds have a par value of $1,000. The bonds pay an 8% annual coupon...

    5a FYI bonds have a par value of $1,000. The bonds pay an 8% annual coupon and will mature in 11 years. i) Calculate the price if the yield to maturity on the bonds is 7%, 8% and 9%, respectively. ii) What is the current yield on these bonds if the YTM on the bonds is 7%, 8% and 9%, respectively. Hint, you can only calculate current yield after you have determined the intrinsic value (price) of the bonds. iii)...

  • A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate....

    A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,050. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to...

  • Bond prices.  Price the bonds from the following table with monthly coupon payments. Par Value Coupon...

    Bond prices.  Price the bonds from the following table with monthly coupon payments. Par Value Coupon Rate Years to Maturity Yield to Maturity Price ​$1,000.00 9​% 25 7% ​? ​$1,000.00 10​% 10 11​% ​? ​$5,000.00 5​% 10 8​% ​? ​$5,000.00 7​% 5 9​% ​? ​Hint: make sure to round all intermediate calculations to at least seven decimal places. a.  Find the price for the bond in the following​ table:  ​(Round to the nearest​ cent.) Par Value Coupon Rate Years to...

  • 1. Bond A sells at a premium, so the YTM must be less than the coupon...

    1. Bond A sells at a premium, so the YTM must be less than the coupon rate. Assume the required rate of return remains constant when we're trying to determine the likelihood of a call being made. If the YTM stays less than the 9% coupon rate, then 5 years from now when the call protection ends, the bond issuer will call the bond, pay the call premium, and refinance with new bonds at lower market rates. Thus, the market...

  • Find the price of a bond. The time is today. The $1,000 par value corporate bond...

    Find the price of a bond. The time is today. The $1,000 par value corporate bond you are interested in has a 5% coupon rate, paid semi-annually. The maturity of the bond is 20 years. The rating agencies have determined that this company should have a B+ rating, making its yield be 6%. Show a time line of these cash flows.   What is the price you will have to pay for the bond? N                I                 PV              PMT           FV Same bond...

  • For the YTM please use the table as i have to do it using my financial...

    For the YTM please use the table as i have to do it using my financial calculator. Thank you 20. Bond Yields Hacker Software has 5.9 percent coupon bonds on the market with 13 years to maturity. The bonds make semiannual payments and currently sell for 104 percent of par. What is the current yield on the bonds? The YTM? The effective annual yield? N I/Y PV PMT FV

  • Coupon rates. What are the coupon rates for the following bonds? Yield to Coupon Years to Coupon Frequency Par Value Maturity Maturity Price Rate $5,000.00 20 $3,925.15 monthly 1,000.00 5% $1,000.00...

    Coupon rates. What are the coupon rates for the following bonds? Yield to Coupon Years to Coupon Frequency Par Value Maturity Maturity Price Rate $5,000.00 20 $3,925.15 monthly 1,000.00 5% $1,000.00 semiannual $1,000.00 9% $1,038.90 annual $1,000.00 11% $677.87 20 quarterly Hint: Make sure to round all intermediate calculations to at least six decimal places a. What is the coupon rate for the following bond? (Round to two decimal places.) Yield to Maturity Coupon Years to Coupon Frequency Par Value...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT