Question

The market price of a bond is $1129 (Face Value = 1000). It has 14 years to maturity and pays an annual coupon of $100 in semi-annual installments. What is the effective annual cost of debenture capital before tax (kd)?

Please help to explain how to do this, should I use D1/P0 + G? *but i couldnt figure out the growth rate.

Answer #1

The before tax cost of capital of debenture capital is the |

YTM (Yield to maturity) of the debenture. |

The YTM is the internal rate of return of the cash flows |

associated with the debenture. |

The cash flows from the bond are: |

*Outflow, being the market price of the bond of $1129. |

*The inflow would consist of the MV of $1000 and the |

semi-annual coupons of $50. |

The YTM is that discount rate which equates the price |

of the debenture of $1129 with the PV of the Maturity value |

and the PV of the semi annual interest payments. |

Hence, |

1129 = 1000*PVIF(r,28)+50*PVIFA(r,28) |

The value of r (YTM/2) is to be found by trial and error or by |

using a financial calculator. |

Using a financial calculator YTM = 8.41% |

a bond has a face value of $1000 and 14 years until maturity.
the bond has a 3% APR coupon with semi- annual coupon payments.
currently, investors seek a 6% APR yield to maturity to hold the
bond. what is the current trading price of the bond?

A bond has a face value of $1000 with a time to maturity ten
years from now. The yield to maturity of the bond now is 10%.
a) What is the price of the bond today, if it pays no
coupons?
b) What is the price of the bond if it pays annual coupons of
8%?
c) What is the price today if pays 8% coupon rate
semi-annually?

Consider a coupon bond that has a face value of $1000, has a
yield of 16%,
pays a semi annual coupon of 70, and matures in one year. Assuming
that the
bond will pay the face value amount that the cost coupon payment on
the
maturity date. Calculate the price of the bond.

(a) Consider a 14-year, 9.5%
corporate bond with face value $10,000. Assume that the bond pays
semi-annual coupons. Compute the fair value of the bond today if
the nominal yield-to-maturity is 11% compounded semi-annually.
(b) Consider a 11-year,
corporate bond with face value $1,000 that pays semi-annual coupon.
With the nominal yield-to-maturity equal to 10%, the bond is
selling at $802.5550. Find the coupon rate for this bond. Assume
that the market is in equilibrium so that the fair value...

A bond with 1000 par value, has 14 years left to maturity has a
coupon rate of 10% with semi-annual coupon payments. The current
yield to maturity is 11.5%. What is the current yield?
12.78%
11.15%
11.95%
13.64%
14.51%

A bond has a face value $1000, maturity of 10 years, and a
coupon rate of 8%, paid semi-annually. Assuming the
yield-to-maturity is 10%, the current price of the bond is:

A corporate bond has a face value of $1000 with a maturity date
20 years from today. The bond pays interest semiannually at a rate
of 8% based on the face value (this means 8%/yr/semi). The interest
rate paid on similar corporate bonds has decreased to a current
rate of 6%/yr/semi (this would be i – the yield rate). What is the
market value of this bond, or what should an investor pay for the
bond?

What is the price of a $1000 face value zero-coupon bond with 4
years to maturity if the required return on these bonds is 3%?
Consider a bond with par value of $1000, 25 years left to
maturity, and a coupon rate of 6.4% paid annually. If the yield to
maturity on these bonds is 7.5%, what is the current bond
price?
One year ago, your firm issued 14-year bonds with a coupon rate
of 6.9%. The bonds make semiannual...

What is the fair value of a $1000 face value, fixed coupon bond
with a coupon rate of 3.7%, yield to maturity of 4.0%, semi-annual
coupon payments and 8 years to maturity?
A. $887.24
B. 998.03
C. 979.63
D. 968.17

suppose there is a bond with 5% semi-annual coupon payments and
a face value of $1000. there are 10 years to maturity and the
yields to maturity are 7 % what is the price of this bond? show
your calculations.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 30 minutes ago

asked 37 minutes ago

asked 42 minutes ago

asked 43 minutes ago

asked 53 minutes ago

asked 56 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago