Question

You are analyzing the cost of debt for a firm. You know that the firm’s 14-year...

You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 8.2 percent coupon bonds are selling at a price of $745.28. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answer the following questions.

What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.)

Homework Answers

Answer #1

Calculating YTM

Par Value $1,000
Coupon Rate 8.20%
Coupons Frequency 2
Maturity 14
Market Price $745.28

Hence payment:

Period Payment
0 -745.28
1 41
2 41
3 41
4 41
5 41
6 41
7 41
8 41
9 41
10 41
11 41
12 41
13 41
14 41
15 41
16 41
17 41
18 41
19 41
20 41
21 41
22 41
23 41
24 41
25 41
26 41
27 41
28 1041

Therefore Return for a period=6.0%

We can calculate using the Excel formula 'IRR'

Hence YTM(Yield To Maturity) =6.0*2(Coupon Frequency)

=12.00%

Another method is using the below formula for calculating YTM to arrive at the approximate value

Formula =

YTM= C+((F-P)/N)
(F+P)/2

where C=Coupon

F=Face Value

P=Present Value

Hence YTM = ~12%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are analyzing the cost of debt for a firm. You know that the firm’s 14-year...
You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 6.6 percent coupon bonds are selling at a price of $609.88. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answer the following questions. Collapse question part (a1) What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.) Current YTM for the bonds %
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s...
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 15.50 percent semiannual coupon bonds are selling at a price of $1,117.25. These bonds are the only debt outstanding for the firm. Collapse question part (a1) What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.) YTM %
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s...
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 10.00 percent semiannual coupon bonds are selling at a price of $846.68. These bonds are the only debt outstanding for the firm. What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.) What is the after-tax cost of debt for this firm if it has a marginal tax rate of 34 percent? (Round intermediate calculations...
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s...
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 15.50 percent semiannual coupon bonds are selling at a price of $1,117.25. These bonds are the only debt outstanding for the firm. (a1) Correct answer iconYour answer is correct. What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.) YTM enter the current YTM of the bonds in percentages rounded to 2 decimal places %...
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s...
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 10.25 percent semiannual coupon bonds are selling at a price of $1,028.51. If these bonds are the only debt outstanding for the firm. What is the current YTM of the bonds?
You are analysing the cost of debt for a company. You know that the company’s 14-year...
You are analysing the cost of debt for a company. You know that the company’s 14-year maturity, 10.55 per cent coupon bonds are selling at a price of $1050.24. The bonds pay interest semi-annually and have a face value of $1000. If these bonds are the only debt outstanding for the company, what is the after-tax cost of debt for this company if the corporate tax is 30 per cent?
Suppose you are trying to estimate the after tax cost of debt for a firm as...
Suppose you are trying to estimate the after tax cost of debt for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). The corporate tax rate for this firm is 37%. The firm's bonds pay interest semiannually with a 5.7% coupon rate and have a maturity of 6 years. If the current price of the bonds is $932.56, what is the after tax cost of debt for this firm? (Answer to the nearest tenth...
The Wildhorse Products Co. currently has debt with a market value of $200 million outstanding. The...
The Wildhorse Products Co. currently has debt with a market value of $200 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,434.63 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $16 per share. The preferred shares pay an annual dividend of $1.20. Wildhorse also has 14 million shares of common stock outstanding...
The Wildhorse Products Co. currently has debt with a market value of $200 million outstanding. The...
The Wildhorse Products Co. currently has debt with a market value of $200 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,434.63 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $16 per share. The preferred shares pay an annual dividend of $1.20. Wildhorse also has 14 million shares of common stock outstanding...
The Oriole Products Co. currently has debt with a market value of $275 million outstanding. The...
The Oriole Products Co. currently has debt with a market value of $275 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,429.26 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $14 per share. The preferred shares pay an annual dividend of $1.20. Oriole also has 14 million shares of common stock outstanding...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT
Active Questions
  • Towards the end of the chapter (The Culture Code by Daniel Coyle), Coyle addresses “Collective Intelligence”...
    asked 4 minutes ago
  • Illustrate the use of (a) capacitive and (b) inductive sensors in a circuit where they are...
    asked 11 minutes ago
  • Lifetimes of AAA batteries are approximately normally distributed. A manufacturer wants to estimate the standard deviation...
    asked 13 minutes ago
  • One bank advertises a nominal rate of 5.81% compounded semiannually. A second bank advertises a nominal...
    asked 16 minutes ago
  • Describe several components of the institutional environment in the HPAEs that are critical to their success....
    asked 20 minutes ago
  • Suppose that grade point averages of undergraduate students at one university have a bell-shaped distribution with...
    asked 22 minutes ago
  • impedance cardiography (ICG) is a noninvasive technology measuring total electrical conductivity of the thorax and its...
    asked 22 minutes ago
  • A 1,710 kg pile driver is used to drive a steel beam into the ground. The...
    asked 41 minutes ago
  • Determine how much is in each account on the basis of the indicated compounding after the...
    asked 45 minutes ago
  • (4) A clinical psychologist investigated whether daily meditation caused an improvement in academic achievement. Some college...
    asked 47 minutes ago
  • Shaking Hands in a Group Chris and his son were among four father-and-son pairs who gathered to...
    asked 51 minutes ago
  • To excite an SPP on the internal metal interface, an additional dielectric layer whose refractive index...
    asked 57 minutes ago