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Bonds are debt instruments issued by companies.
Companies issuing the bonds pay periodic coupons to the bond holders.
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- Corral Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 8.5 percent, payable annually. The one-year interest rate is 8.5 percent. Next year, there is a 40 percent probability that interest rates will increase to 10 percent, and there is a 60 percent probability that they will fall to 6 percent. If the company decides instead to make the bonds callable in one year, what coupon will be demanded by the bondholders for the bonds to sell at par? Assume that the bonds will be called if interest rates fall and that the call premium is equal to the annual coupon. a) 8.12% b) 8.77% c) 8.59% d) 8.35%Lopez Information Systems is planning to issue 10-year bonds. The going market yield for such bonds is 8.45 percent. Assume that coupon payments will be made semiannually. The firm is trying to decide between issuing an 8 percent coupon bond or a zero coupon bond. The company needs to raise $1 million. What will be the price of an 8 percent coupon bond? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and bonds value to 2 decimal places, e.g 15.25.) Bond value $ How many 8 percent coupon bonds would have to be issued? (Round number of bonds to the nearest whole number, e.g 5,275.) Number of bonds issued What will be the price of a zero coupon bond? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and bonds value to 2 decimal places, e.g 15.25.) Price of a zero coupon bond $ How many zero coupon bonds will have to be issued? (Round number of bonds to the nearest whole number, e.g 5,275.) Number of bonds…Pybus, Inc. is considering issuing bonds that will mature in 23years with an annual coupon rate of 9 percent. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 7percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 8 percent. What will be the price of these bonds if they receive either an A or a AA rating? The price of the Pybus bonds if they receive a AA rating will be $__________ (Round to the nearest cent.)
- Bonaqua Alison Corporation Limited is planning to issue 10-year bonds with a face value of $1,000. The current market rate for similar bonds is 3.5%. Assume that coupon payments will be semi-annual. The company is trying to decide between issuing a 2.8% coupon bond or a zero coupon bond. The company needs to raise $2.5 million. a. What will be the price of the 2.8% coupon bonds? b. How many coupon bonds would have to be issued? c. Is the bond selling at a premium and why? d. What will be the price of the zero coupon bonds?Pybus, Inc. is considering issuing bonds that will mature in 15 years with an annual coupon rate of 9 percent. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 12 percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 13 percent. What will be the price of these bonds if they receive either an A or a AA rating? Question content area bottom Part 1 a. The price of the Pybus bonds if they receive a AA rating will be $enter your response hereLuther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: Rating AAA AA A ВВВ BB YTM 6.6% 6.8% 6.9% 7.3% 7.8% Assuming that Luther's bonds receive a AAA rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to: OA. 30,216 B. 25180 OC. 35,252 OD. 20,144
- Pybus, Inc. is considering issuing bonds that will mature in 24 years with an annual coupon rate of 7 percent. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 8.5 percent. However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 9.5 percent. What will be the price of these bonds if they receive either an A or a AA rating? The price of the Pybus bonds if they receive a AA rating will be ($enter your response here). (Round to the nearest cent.)Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1,000. The bonds are callable at $1,260. One-year interest rates are 9 percent. There is a 60 percent probability that long-term interest rates one year from today will be 10 percent, and a 40 percent probability that they will be 8 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Coupon rate %Williams Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 6.5%, payable annually, and a par value of $1,000. The 1-year interest rate is 6.5%. Next year, there is a 35% probability that interest rates will increase to 8% and a 65% probability that they will fall to 5%. If the company decides instead to make the bonds callable in one year, what coupon will be demanded by the bondholders for the bonds to sell at par? Assume that the bonds will be called if interest rates fall and that the call premium is equal to the annual coupon.
- Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1,000. The bonds are callable at $1,140. One-year interest rates are 9 percent. There is a 60 percent probability that long-term interest rates one year from today will be 10 percent and a 40 percent probability that they will be 8 percent. Assume that if interest rates fall, the bonds will be called. What coupon rate should the bonds have in order to sell at par value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Please answer fast I give you upvoteA company is planning to issue perpetual, callable bonds with a coupon rate of 8% paid annually, and a par value of $1,000. The nominal interest rate on these bonds will be 9% for the next year. In one year, the nominal rate on the bonds will be either 10% with probability 0.6, or 8% with probability 0.4. The bonds are callable at $1200. Assuming the bonds are called if the interest rate decreases, what is the price of the callable bond today?Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1,000. The bonds are callable at $1,250. One-year interest rates are 12 percent. There is a 60 percent probability that long-term interest rates one year from today will be 13 percent, and a 40 percent probability that they will be 11 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)