To finance a new line of product, Larissa Toys has issued a bond with a par value of $1,000, coupon rate of 8 percent, and maturity of 30 years. Compute the price of the bond if the required return on the bond is 10% and interest is paid annually. Compute the price of the bond if the required return on the bond is 10% and interest is paid semi-annually.
Q: At the beginning of the year, you bought a $1,000 par value corporate bond with a 6 percent annual…
A: par = $1000 coupon rate = 6% n= 10 year r=8%
Q: A company is planning to issue perpetual, callable bonds with a coupon rate of 8% paid annually, and…
A: Callable Bonds Callable bonds have a special feature for the issuer of the bond that if market…
Q: Macy’s is planning a store expansion by issuing 10-year coupon bond that makes semi-annual coupon…
A: A bond is a debt instrument that provides the issuer with the current value which must be repaid…
Q: A company issued a bond a few years ago that has a face value equal to $1,000 and pays investors $30…
A: Given information: Par value : $1000 Semi-annual coupon payment : $30 time to maturity : 8 years…
Q: With a view to raising a large amount of debt financing for expansion purposes, Tulip Co. will issue…
A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Bradford Manufacturing Company has just issued a 13-year, 13% coupon interest rate, $1,000-par bond…
A: The Price of the bond or current selling price of the bond is the sum of the present value of future…
Q: Williams Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of…
A: If the bond is called one year from today at a call price of $1080, then the price of the bond today…
Q: hat will be the price of these bonds if they receive either an A or a AA rating?
A: Bond: It is a debt instrument issued by a company (issuer) for raising capital. The issuer pays the…
Q: Endicott Enterprises Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If…
A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…
Q: To expand its business, the ABC factory would like to issue a bond with par value of P1,000, coupon…
A: The value of the bond is calculated as present value of cash flows.
Q: The ARA Corporation bonds have a coupon of 14%, pay interest semi-annually, and they will mature in…
A: Bond price is present value of coupon payment and maturity payment received during life of bond
Q: St. Thomas Company is planning to issue $1,000 par value bonds. The bonds will have a coupon rate…
A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…
Q: Williams Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of…
A: If market interest rate is 8%, then Price in Year 1 would be If market interest rate is 5%, then…
Q: You are pricing a 10-year, 7 percent coupon bond with a $1,000 face value. Coupon payments are made…
A: This question provides that other similar maturity & credit quality bonds have the yield to…
Q: Thatcher Corporation’s bonds will mature in 15 years. The bonds have a face value of $1,000 and a 6…
A: Using financial caluclator, N (No. of compounding periods) = 15*2 =30 PV (Price of bond) = -1100 FV…
Q: Crown Enterprises recently issued a bond that has a $1,000 face or par value. This bond has a…
A: Solution Given Face value 1000 Coupon rate 8% Life 10 years Required rate of…
Q: ABC, Inc. has issued a bond with par value of $1,000, a coupon rate of 9 percent that is paid…
A: Face value =$1000 Coupon rate =9% So, coupon payment = 0.09*1000 =$90 Time =20 years Yield =11%…
Q: Pybus, Inc. is considering issuing bonds that will mature in 17 years with an annual coupon rate of…
A: The time value concept tells that the value received today has more value than that of receiving the…
Q: Microsoft plans to issue $10 million of bonds with a coupon rate of 8 percent, a par value of…
A: Bond Price is computed by taking the current value of 8% coupons but because expected interest rates…
Q: Phil Manufacturing, Inc. bonds have a face value of $1,000, a coupon rate of 6.5 percent, semiannual…
A: The term bonds refer to the debt instruments that are issued with a motive to raise debt from the…
Q: A company needs to raise $20 million and is considering issuing 5-year bonds for this purpose.…
A: The bonds are redeemed at their par-value with regular coupon payments but when bonds are not…
Q: XYZ Co. is planning to issue stripped bonds with a face value of $100 and maturity of 10 years. What…
A: Face Value = 100 Time Period (N) = 10 years or 20 semi annual periods Yield to Maturity = 5.5%/2 =…
Q: Aeri Lee is looking to invest in a two-year bond from Aegyo Productions Corporation. The company…
A: The total return that the bondholder expects to receive by holding the bond till the maturity date…
Q: Corporation Ltd. have 6% coupon bonds traded on the market that have 5 years left to maturity. The…
A: Coupon rate = 0.06 Annual coupon amount (C) = £60 (i.e. £1000 * 0.06) Required return (r) = 0.10…
Q: To finance a new line of product, Larissa Toys has issued a bond with a par value of $1,000, coupon…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Five years ago, Sportify Inc. issued a 20-year bond with an annual coupon rate of 12% to finance its…
A: The Net Present Value: The Net Present Value is a technique that is used to assess the viability of…
Q: Suppose your company needs to raise $28 million and you want to issue 20-year bonds for this…
A:
Q: Suppose Harry Davis issues 30-year debt with a par value of $1,000 and a coupon rate of 10%, paid…
A: We need to use approximation method for calculation of cost of debt Cost of debt =I(1-T)…
Q: Maroon Two Inc. has just issued 10,000 coupon bonds with face value of $1,000, coupon rate of 9%,…
A: Bond price is defined as the present discounted value for the future cash stream, which used to be…
Q: To expand its business, Laris Company would like to issue a bond with par value of $1,000, coupon…
A: The value of a bond is the sum of the present value of interest and the present value of maturity…
Q: National Co. wants to construct a bond portfolio consisting of Bulldogs bonds which has a maturity…
A: The value of a bond refers to the fair price, which is determined by calculating the present value…
Q: XYZ issued a bond with a par value of P1,000. The bond pays an interest of P35 each quarter, and has…
A: We need to calculate the price of bond which will be sum of the present value of all coupon payment…
Q: Suppose you purchased a corporate bond with a 10-year maturity, a $1,000 par value, a 10% coupon…
A: Given: Particular Value Par Value 1000 Time to maturity 14 Coupon rate 10%
Q: The ARA Corporation bonds have a coupon of 14%, pay interest semi-annually,and they will mature in 7…
A: coupon rate = 14% semi annually (7%) time period = 7 years required rate of return = 10% annually no…
Q: Brooks Inc.'s callable bonds are currently selling for $1,300. They pay a coupon rate of 10%…
A: Yield to call (YTC) is a return on bond held by an investor anytime before the date of its maturity.…
Q: The Shamrock Corporation has just isssued a $1,000 par value zero-coupon bond with an 8 percent…
A: FV = Par Value = $ 1,000Yield, y = 8%Since we have been asked to assume semi annual compounding, we…
Q: Silver Run Inc. has 6% coupon bonds outstanding that pay interest semiannually and have 15 years…
A: Bonds are the debt security which is issue by corporates or government for collecting a funds. Bonds…
Q: A bond matures in 15 years and pays an 8 percent annual coupon. The bond has a face value of $1,000…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Ford Motor Co. has BB rated bonds outstanding that mature in 18 years, and have a 8.000% coupon…
A: FORD MOTOR CO SEMI ANNUAL COMPOUNDING Yield to maturity (18*2) 36 coupon amount…
Q: Johnson Motors's bonds have 10 years remaining to matu rity. Interest is paid annually, the bonds…
A: Solution- Coupon Rate It is the annual fixed rate of interest that a particular bond pays to the…
Q: A Boba Drinks LLC. is considering to issue perpetual, callable bonds with a coupon rate of 5% paid…
A: Callable bonds have a special feature for the issuer of the bond that if market interest rate is…
Q: QAV Group wants to issue ninety 10-year, $1,000 zero-coupon bonds. If each bond is to yield 6%, how…
A: A bond is a financial instrument that is issued in the financial markets by the corporations and…
Q: Intal Corporation bonds have a coupon of 14%, pay interest semiannually, and mature in 7 years. Your…
A: Coupon rate = 14% Semi annually = 14/2 = 7% Since it is semi annually, return on investment = 10/2 =…
Q: Find the value of a bond maturing in 11 years, with a $1,000 par value and a coupon interest rate…
A: Semiannual coupon amount (s) = $55 (i.e. $1000 * 0.055) Semiannual required return (r) = 0.075…
To finance a new line of product, Larissa Toys has issued a bond with a par value of $1,000, coupon rate of 8 percent, and maturity of 30 years.
- Compute the price of the bond if the required return on the bond is 10% and interest is paid annually.
- Compute the price of the bond if the required return on the bond is 10% and interest is paid semi-annually.
Trending now
This is a popular solution!
Step by step
Solved in 7 steps with 6 images
- Sain and Lewis Investment Management (SLIM), Inc. is considering the purchase of a number of bonds to be issued by Southeast Airlines. The bonds have a face value of $10,000 with an interest rate of 7.5% payable annually. The bonds will mature 10 years after they are issued. The issue price is expected to be $8750. Determine the yield to maturity (IRR) for the bonds. If SLIM Inc. requires at least a 10% return on all investments, should the firm invest in the bonds?A mortgage bond issued by Automation Engineering is for sale for $8,900. The bond has a face value of $10,000 with a coupon rate of 5% per year, payable annually. What rate of return will be realized if the purchaser holds the bond to maturity 9 years from now? The rate of return will be % per year.To finance a new line of product, Larissa Toys has issued a bond with a par value of $1,000, coupon rate of 8 percent, and maturity of 30 years. Compute the price of the bond if the required return on the bond is 10% and interest is paid annually. Compute the price of the bond if the required return on the bond is 10% and interest is paid semi-annually. Iris Corp issued bonds with a coupon rate of 15%, pay coupons annually, have 6 years remaining to maturity, and are currently priced at $950 per bond. What is the yield to maturity? Compute the value of a share of common stock of Lara’s Cookie Company whose most recent dividend was $3.50 and is expected to grow at 2 percent per year for the next 5 years, after which the dividend growth rate will increase to 5 percent per year indefinitely. Assume a 12 percent required rate of return. Marshall Law firm expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expected to…
- A mortgage bond issued by Automation Engineering is for sale for $8,800. The bond has a face value of $10,000 with a coupon rate of 7% per year, payable monthly. What rate of return will be realized if the purchaser holds the bond to maturity 10 years from now? The rate of return will be % per year.A mortgage bond issued by Automation Engineering is for sale for $7,700. The bond has a face value of $10,000 with a coupon rate of 6% per year, payable semi-annually. What rate of return will be realized if the purchaser holds the bond to maturity 6 years from now? The rate of return will be % per year.A mortgage bond issued by Automation Engineering is for sale for $8,700. The bond has a face value of $10,000 with a coupon rate of 7% per year, payable quarterly. What rate of return will be realized if the purchaser holds the bond to maturity 8 years from now?
- A mortgage bond issued by Automation Engineering is for sale for $8200. The bond has a face value of $10,000 with a coupon rate of 8% every six months, payable annually. What rate of return will be realized if the purchaser holds the bond to maturity 5 years from now?Macy’s is planning a store expansion by issuing 10-year coupon bond that makes semi-annual coupon payments at a rate of 5.875% with a face value of $1,000. Assuming semi-annual compounding, what will be the price of these bonds, if the appropriate yield to maturity (discount rate) is 14%?A 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?
- For a company, you plan to buy the following bond: Time to maturity, 6 years; coupon rate, 8%; Coupon payment, annual; Market interest rate, 8%; Face value, $1,000. Using Excel, calculate the duration of the bond. Using Excel, calculate the accumulated value of invested payment(or receipt) when you find market interest rate a year later is now 8%, 9%, and 7%, respectively. Using Excel, calculate geometric average rate of return (or realized compound return).Berk Bhd issues bonds that pay interest semi-annually and have maturities of 1 year and 30 years. The bonds have a face value of RM1,000 and an annual coupon rate of 10 percent. i) If investors have demanded an interest rate of 5 percent on the bond investment, what is the maximum prices to pay for the 1-year bond and 30-year bond? ii) Suppose that the interest rate has increased to 20%, calculate the values of the 1-year bond and 30-year bond.Cardinal Mania is financing a new investment project by issuing five-year bonds. Each bond has the face value of $1,000, and each bond pays out a $25 coupon each year (annual coupon.) Cardinal Mania plans to issue 1000 such bonds to raise the required funding of $870,000. Please answer the following questions: A. Calculate the yield to maturity and the current yield of this bond. B. Your tax rate is 20%, and the bond from Cardinal Mania is not tax-exempt. Suppose you can also invest in a five-year tax-exempt municipal bond with a yield of 3%. Would you buy the Cardinal Mania bond or the municipal bond? C. What would the holding period return rate be if you hold the Cardinal Mania bond for two years before selling it at par?