Question

a. Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 6.6%. Now, with 6 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 13%. What is the price of the bond now? (Assume semiannual coupon payments.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 86% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Answer #1

a)

b)

a. Several years ago, Castles in the Sand Inc. issued bonds at
face value of $1,000 at a yield to maturity of 6%. Now, with 6
years left until the maturity of the bonds, the company has run
into hard times and the yield to maturity on the bonds has
increased to 11%. What is the price of the bond now? (Assume
semiannual coupon payments.) (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Bond Price:
b....

a. Several years ago, Castles in the Sand Inc. issued bonds at
face value of $1,000 at a yield to maturity of 5%. Now, with 5
years left until the maturity of the bonds, the company has run
into hard times and the yield to maturity on the bonds has
increased to 10%. What is the price of the bond now? (Assume
semiannual coupon payments.) (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
b. Suppose that...

a. Several years ago, Castles in the Sand Inc. issued bonds at
face value of $1,000 at a yield to maturity of 6%. Now, with 6
years left until the maturity of the bonds, the company has run
into hard times and the yield to maturity on the bonds has
increased to 11%. What is the price of the bond now? (Assume
semiannual coupon payments.)
b. Suppose that investors believe that Castles
can make good on the promised coupon payments...

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What is their nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
What is their nominal yield to call? Do not round intermediate
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(CHAPTER 7) A corporation has just issued 6% coupon bonds with
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intermediate calculations. Round your answer to two decimal
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What is their nominal yield to call? Do not round intermediate
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What return should investors expect to...

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What is their nominal yield to maturity? Do not round
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What return should investors expect to earn on...

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Round your answer to two decimal places. % What is their nominal
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A firm's bonds have a maturity of 14 years with a $1,000 face
value, have an 11% semiannual coupon, are callable in 7 years at
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Round your answer to two decimal places. 3.27 % What is their
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