Question

Problem 13-10 You are given the following information concerning a noncallable, sinking fund debenture: • Principal: $1,000 • Coupon rate of interest: 8 percent · Term to maturity: 12 years • Sinking fund: 3 percent of outstanding bonds retired annually; the balance at maturity a. If you buy the bond today at its face amount and interest rates rise to 13 percent after two years have passed, what is your capital gain or loss? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Use a minus sign to enter the loss amount, if any, as a negative value. Round your answer to the nearest dollar.

Answer #1

**Capital gain = -$271.31**

A bond has the following features: Coupon rate of interest (paid
annually): 11 percent Principal: $1,000 Term to maturity: 8
years
What will the holder receive when the bond matures?
__________
If the current rate of interest on comparable debt is 8 percent,
what should be the price of this bond? Assume that the bond pays
interest annually. Use Appendix B and Appendix D to answer the
question. Round your answer to the nearest dollar.
$________
Would you expect the...

Use excel or financial calculator
A bond has the following features:
Coupon rate of interest (paid annually): 12 percent
Principal: $1,000
Term to maturity: 10 years
What will the holder receive when the bond matures?
-Select-Principal/ All coupon payments
If the current rate of interest on comparable debt is 8 percent,
what should be the price of this bond? Assume that the bond pays
interest annually. Round your answer to the nearest dollar.
$
Would you expect the firm to...

1.A bond has the following terms:
Principal
amount
$1,000
Annual Interest rate
$75 starting
3 years have passed (that is in year 4)
Maturity
10 years
Callable
@ $1,075 (that is face value + one year’s interest)
a) Why do you believe that the terms were constructed as
specified?
b) What is the bond’s price if comparable debt yields 5
percent?
c)What is the bond’s current yield?
d) Even though interest rates have fallen, why...

1. Allright Corporation started making sinking fund deposits of
$20,000 today. Its bank pays 5% compounded semi-annually and the
deposits will be made at the beginning of every six months for 20
years. What will the fund be worth at the end of that time?
a. $1,381,752
b. $1,567,980
c. $1,425,658
d. $1,623,876
2. Given a 30-year mortgage loan of $100,000, monthly pay in
arrrears, fully amortizing with an annual interest rate of 5%, what
is the balance of the...

Two bonds have the following
terms:
Bond A
Principal
$1,000
Coupon
8%
Maturity
10
years
Bond B
Principal
$1,000
Coupon
7.6%
Maturity
10
years
Bond B has an additional feature: It
may be redeemed at par after five years (i.e., it has a put
feature). Both bonds were initially sold for their face amounts
(i.e., $1,000).
If interest rates fall to 7 percent, what will be the price of
each bond?
If interest rates rise to 9 percent,
what will...

A $1,000 par value bond was issued five years ago at a 10
percent coupon rate. It currently has 10 years remaining to
maturity. Interest rates on similar debt obligations are now 12
percent. Use Appendix B and Appendix D for an approximate answer
but calculate your final answer using the formula and financial
calculator methods.
a. Compute the current price of the bond using an assumption of
semiannual payments. (Do not round intermediate calculations and
round your answer to...

1.A bond has the following terms:
Principal amount $1,000
Annual Interest rate $75 starting 3 years have passed
(that is in year 4)
Maturity 10 years
Callable @ $1,075 (that is face value + one year’s
interest)
a) Why do you believe that the terms were constructed as
specified?
b) What is the bond’s price if comparable debt yields 5
percent?
c)What is the bond’s current yield?
d) Even though interest rates have fallen, why may you not
expect the...

A $1,000 par value bond was issued five years ago at a coupon
rate of 8 percent. It currently has 25 years remaining to maturity.
Interest rates on similar debt obligations are now 10 percent. Use
Appendix B and Appendix D for an approximate answer but calculate
your final answer using the formula and financial calculator
methods. a. Compute the current price of the bond using an
assumption of semiannual payments. (Do not round intermediate
calculations and round your answer...

Problem 6-17 Bond Returns (LO2, 3)
A bond with a face value of $1,000 has 10 years until maturity,
carries a coupon rate of 7.2%, and sells for $1,180. Interest is
paid annually.
a. If the bond has a yield to maturity of 10.8%
1 year from now, what will its price be at that time? (Do
not round intermediate calculations. Round your
answer to nearest whole number.)
b. What will be the annual rate of return on
the bond?...

A $1,000 par value bond was issued five years ago at a 12
percent coupon rate. It currently has 25 years remaining to
maturity. Interest rates on similar debt obligations are now 14
percent. Use Appendix B and Appendix D for an approximate answer
but calculate your final answer using the formula and financial
calculator methods.
a. Compute the current price of the bond using
an assumption of semiannual payments. (Do not round
intermediate calculations and round your answer to...

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