Question

1. Bradshaw Inc. is issuing 10-year bonds with a coupon rate of 6% and a face...

1. Bradshaw Inc. is issuing 10-year bonds with a coupon rate of 6% and a face value of $1,000. If the coupon payments are paid semiannually and the return on bonds with similar risk is currently 8%, how much would you be willing to pay for one of these bonds?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

We can use the bond price formula:

Where,
C = Periodic coupon payment,
P = Par value or face value of bond,
r = Current market interest rate
n = Years to maturity

When coupon payments are paid semi-annually:

C = 1000 * (6% / 2) = $30
r = 8% / 2 = 4% = 0.04
n = 10 * 2 = 20

Therefore,

Therefore, the bond price should be $864.10.

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
FINC3320 Bradshaw Inc is issuing 10 year bonds with a coupon rate of 6% and a...
FINC3320 Bradshaw Inc is issuing 10 year bonds with a coupon rate of 6% and a face value of 1,000. Coupon payments are paid semiannually and return on bonds with similar risk is currently 8%, how much would you be willing to pay for one of these bonds?*** Please break down the problem and how each part of the equation was calculated***
Suppose that on October 8, 2013 ACME Inc. issued 10-year coupon bonds with a face value...
Suppose that on October 8, 2013 ACME Inc. issued 10-year coupon bonds with a face value of $1,000 and coupon payments of $100. (the coupons are paid each year on October 8, starting with the year 2014). Suppose that on October 8, 2013, ACME bonds sold for $950. 5. What can you say about the value of the the yield to maturity paid by ACME bonds, without calculating it? Suppose that in 2017 the interest rate decreases to 10%. 6....
Ivanhoe, Inc., management wants to raise $1 million by issuing six-year zero coupon bonds with a...
Ivanhoe, Inc., management wants to raise $1 million by issuing six-year zero coupon bonds with a face value of $1,000. The company’s investment banker states that investors would use an 10.4 percent discount rate to value such bonds. Assume semiannual coupon payments. At what price would these bonds sell in the marketplace? (Round answer to 2 decimal places, e.g. 15.25) Market rate $ How many bonds would the firm have to issue to raise $1 million? (Round answer to 0...
BA Corp is issuing a 10-year bond with a coupon rate of 8.22 percent. The interest...
BA Corp is issuing a 10-year bond with a coupon rate of 8.22 percent. The interest rate for similar bonds is currently 5.43 percent. Assuming annual payments, what is the value of the bond?
The face value for WICB Limited bonds is $250,000 and has a 6 percent annual coupon....
The face value for WICB Limited bonds is $250,000 and has a 6 percent annual coupon. The 6 percent annual coupon bonds matures in 2035, and it is now 2020. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 10 percent. How much should Karen sell her bonds today?
1. BA Corp is issuing a 10-year bond with a coupon rate of 7.19 percent. The...
1. BA Corp is issuing a 10-year bond with a coupon rate of 7.19 percent. The interest rate for similar bonds is currently 4.70 percent. Assuming annual payments, what is the value of the bond? (Round answer to 2 decimal places, e.g. 15.25.)
​Pybus, Inc. is considering issuing bonds that will mature 22years with an annual coupon rate of...
​Pybus, Inc. is considering issuing bonds that will mature 22years with an annual coupon rate of 11 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 11.5 percent. ​ However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A​ rating, the yield...
ABC issues 6%, 10 year bonds with a face amount of $100,000. The market interest rate...
ABC issues 6%, 10 year bonds with a face amount of $100,000. The market interest rate for bonds of similar risk and maturity is 4%. Interest is paid semiannually. At what price will the bonds issue? 116,222 116,351 117,155 116,024 115,873
Please answer the 8 questions. Thank you! 1. Cullumber, Inc., has issued a three-year bond that...
Please answer the 8 questions. Thank you! 1. Cullumber, Inc., has issued a three-year bond that pays a coupon rate of 9.4 percent. Coupon payments are made semiannually. Given the market rate of interest of 4.0 percent, what is the market value of the bond? Round answer to 2 decimal places 2. Ten-year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000 and interest is compounded semiannually. If similar bonds in the market yield 11.6...
ABC Inc.’s bonds have a 10% coupon rate and $1000 face value. Interest is paid semi-annually,...
ABC Inc.’s bonds have a 10% coupon rate and $1000 face value. Interest is paid semi-annually, and the bonds have a maturity of ten years. If the appropriate discount rate is 8%/year compounded semi-annually on similar bonds, what is the price of ABC’s bonds?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT