Question

A GM and a Ford bond both have 4 years to maturity, a $1,000 par value,...

A GM and a Ford bond both have 4 years to maturity, a $1,000 par value, a BB rating and pay interest semiannually. GM has a coupon rate of 7%, while Ford has a coupon rate of 5.1%.

What should be the price of the Ford bond (in $)?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Information provided:

Face value= future value= $1,000

Time= 4 years*2= 8 semi-annual periods

Coupon rate= 5.1%/2= 2.55%

Coupon payment= 0.0255*1,000= $25.50 per semi-annual period

The price of the Ford bond is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 1,000

PMT= 25.50

N= 8

Press the CPT key and PV to compute the present value.

The value obtained is 1,204.

Therefore, the price of the Ford bond is $1,204.

0 0
Know the answer?
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
Similar Questions
Boeing has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon...
Boeing has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon rate of 6.8%, with coupons paid semiannually, and a price of 98.16 (percent of par). If the company wants to issue a new bond with the same maturity at par, what coupon rate should it choose?
BP has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon...
BP has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon rate of 6.8%, with coupons paid semiannually, and a price of 91.25 (percent of par). What is the cost of debt?
You are interested in buying a $1,000 par value bond with 20 years to maturity and...
You are interested in buying a $1,000 par value bond with 20 years to maturity and a 8% coupon rate that is paid semiannually. How much should you be willing to pay for the bond if the required rate of return (discount rate) is 10%? (8’) Please show work
Finance 1. A bond has a $1,000 par value, 10 years to maturity, and an 8%...
Finance 1. A bond has a $1,000 par value, 10 years to maturity, and an 8% annual coupon and sells for $980. a. What is its yield to maturity (YTM)? Round your answer to two decimal places. __% b. Assume that the yield to maturity remains constant for the next four years. What will the price be 4 years from today?Do not round intermediate calculations. Round your answer to the nearest cent. $____ 2. Nesmith Corporation's outstanding bonds have a...
A. A bond has a par value of $1,000, a time to maturity of 20 years,...
A. A bond has a par value of $1,000, a time to maturity of 20 years, and a coupon rate of 7.50% with interest paid annually. If the current market price is $750, what will be the approximate capital gain of this bond over the next year if its yield to maturity remains unchanged? (Do not round intermediate calculations. Round your answer to 2 decimal places.) B. Suppose that today’s date is April 15. A bond with a 8% coupon...
A $1,000 par value bond with 5 years left to maturity pays an interest payment semiannually...
A $1,000 par value bond with 5 years left to maturity pays an interest payment semiannually with a 8 percent coupon rate and is priced to have a 5.5 percent yield to maturity. If interest rates surprisingly change by 0.27 percent, by how much would the bond’s price change?
4. You have the opportunity to purchase a 25-year, $1,000 par value bond that has an...
4. You have the opportunity to purchase a 25-year, $1,000 par value bond that has an annual coupon rate of 9%. If you require a YTM of 7.6%, how much is the bond worth to you?   5. A $1,000 par value bond that has a current price of $950 and a maturity value of $1,000 matures in three years. If interest is paid annually and the bond is priced to yield 9%, what is the bond’s annual coupon rate?   8....
Par Value : $1,000 Coupon Rate : 8% Maturity period : 5 Years Market Price :...
Par Value : $1,000 Coupon Rate : 8% Maturity period : 5 Years Market Price : 1,110 Instructions: Please using Trial and Error to find the expected rate of return with PVIFA and PVIF Table and the Duration with the following information: Duration of a zero-coupon bond equals its maturity. It is only for zero-coupon bonds that duration and maturity are equal. Indeed, for any bond that pays some cash flows prior to maturity, its duration will always be less...
 ​(Bond valuation) A bond that matures in 20 years has a ​$1,000 par value. The annual...
 ​(Bond valuation) A bond that matures in 20 years has a ​$1,000 par value. The annual coupon interest rate is 7 percent and the​ market's required yield to maturity on a​ comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest​ annually? What would be the value of this bond if it paid interest​ semiannually?
A bond with a $1,000 par, 7 years to maturity, a coupon rate of 4%, and...
A bond with a $1,000 par, 7 years to maturity, a coupon rate of 4%, and annual payments has a yield to maturity of 4%. What will be the actual percentage change in the bond price if the yield changes instantaneously to 5.5%? (If your answer is, e.g., 1.123%, enter it as 1.123.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT