Question

With celebrity bonds, celebrities raise money by issuing bonds to investors. The royalties from sales of the music are used to pay interest and principal on the bonds. In April of 2009, EMI announced that it intended to securitize its back catalogue with the help of the Bank of Scotland. The bond was issued with a coupon rate of 6.75% and will mature on this day 21

years from now. The yield on the bond issue is currently 6.3%.

At what price should this bond trade today, assuming a face value of $1,000 and annual coupons?

Answer #1

**Price of the Bond**

The Price of the Bond is the Present Value of the Coupon payments plus the Present Value of Par Value

Par Value = $1,000

Annual Coupon Amount = $67.50 [$1,000 x 6.75%]

Yield to Maturity (YTM) = 6.30%

Maturity Years = 21 Years

The Price of the Bond = Present Value of the Coupon payments + Present Value of Par Value

= $67.50[PVIFA 6.30%, 21 Years] + $1,000[PVIF 6.30%, 21 Years]

= [$67.50 x 11.47293] + [$1,000 x 0.27721]

= $774.42 + $277.21

= $1,051.63

**“Therefore, the**
**Bond is trading at $1,051.63”**

With celebrity bonds, celebrities raise money by issuing bonds
to investors. The royalties from sales of the music are used to pay
interest and principal on the bonds. In April of 2009, EMI
announced that it inherited to securitize its back catalogue with
the help of the Bank of Scotland. The bond was issued with a coupon
rate of 6.85% and will mature on this day 40 years from now. The
yield on the bond issue is currently 6.15%. At...

With celebrity bonds, celebrities raise money by issuing bonds
to investors. The royalties from sales of the music are used to pay
interest and principal on the bonds. In April of 2009, EMI
announced that it intended to securitize its back catalogue with
the help of the Bank of Scotland. The bond was issued with a coupon
rate of 6.5% and will mature on this day 37 years from now. The
yield on the bond issue is currently 6.4%. At...

A company wants to raise $600,000 by issuing zero coupon bonds.
The bonds have a face value of $1,000 and will mature in 8 years.
The issue price gives potential investors a yield to maturity of 3%
p.a. (nominal). Assume comparable-risk coupon bonds normally pay
semi-annual coupons
Calculate the issue price per bond. (Round your answer to 2
decimal places. Do not include the $ symbol. Do not use comma
separators. E.g. 1234.56)
Answer
How many bonds should the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago