Question

(Bond

valuationlong dash—zero

coupon)

The Latham Corporation is planning on issuing bonds that pay no interest but can be converted into

$1,000at maturity, 7 years from their purchase. To price these bonds competitively with other bonds of equal risk, it is determined that they should yield 6 percent, compounded annually. At what price should the Latham Corporation sell these bonds?

The price of the Latham Corporation bonds should be$

(Bond

valuation)

You are examining three bonds with a par value of

$1,000

(you receive

$1,000

at maturity) and are concerned with what would happen to their market value if interest rates (or the market discount rate) changed. The three bonds are

Bond

Along dash—a

bond with 6 years left to maturity that has an annual coupon interest rate of

11percent, but the interest is paid semiannually.

Blong dash—a

bond with

9 years left to maturity that has an annual coupon interest rate of 11

percent, but the interest is paid semiannually.

Bond

Clong dash—a

bond with

15

years left to maturity that has an annual coupon interest rate of

11 percent, but the interest is paid semiannually.

What would be the value of these bonds if the market discount rate were

a.

11

percent per year compounded semiannually?

b.

5

percent per year compounded semiannually?

c.

17

percent per year compounded semiannually?

d. What observations can you make about these results?

Answer #1

Answers are available in the image below.

Value of bonds is derived using PV function. Formula is pasted in adjacent cell for ease of reference.

Observation on results:

Other things being equal - bonds with longer time to maturity are more sensitive to changes in yields than short tenure bonds.

Due to convexity effect, downward movement in yield will have greater impact on price as compared to equivalent upward movement in yield

(Bond valuation) You are examining three bonds with a par value
of $1 comma 000 (you receive $1 comma 000 at maturity) and are
concerned with what would happen to their market value if interest
rates (or the market discount rate) changed. The three bonds are
Bond Along dash a bond with 6 years left to maturity that has an
annual coupon interest rate of 9 percent, but the interest is paid
semiannually. Bond Blong dash a bond with 11...

a) Johnson Motors’ bonds have 10 years remaining to maturity.
Coupon interest is paid annually, the bonds have a $1,000 par
value, and the coupon rate is 7 percent. The bonds have a yield to
maturity of 8 percent. What is the current market price of these
bonds?
b) BSW Corporation has a bond issue outstanding with an annual
coupon rate of 7 percent paid semiannually and four years remaining
until maturity. The par value of the bond is $1,000....

(Present value) The Kumar Corporation is planning on issuing
bonds that pay no interest but can be converted into $ 9000 at
maturity, 20 years from their purchase. To price these bonds
competitively with other bonds of equal risk, it is determined
that they should yield 11 percent, compounded annually. At what
price should the Kumar Corporation sell these bonds? Kumar
Corporation should sell these bonds at

Bond valuation long dash—Semiannual interest. Find the value of
a bond maturing in 7 years, with a $1,000 par value and a coupon
interest rate of 13% (6.5% paid semiannually) if the required
return on similar-risk bonds is 12% annual interest (6% paid
semiannually).
The present value of the bond is $?

Enterprise, Inc. bonds have an annual coupon rate of 16 percent.
The interest is paid semiannually and the bonds mature in 11 years.
Their par value is $1,000. If the market's required yield to
maturity on a comparable-risk bind us 13 percent, what is the value
of the bond? What is its value if the interest is paid annually?
The value of the enterprise bonds if the interest is paid
semiannually is $(___). (round to the nearest cent).

(Bond valuation) Hamilton, Inc. bonds have a coupon rate of 15
percent. The interest is paid semiannually, and the bonds mature
in 12 years. Their par value is $1,000. If your required rate of
return is 11 percent, what is the value of the bond? What is the
value if the interest is paid annually? a. If the interest is
paid semiannually, the value of the bond is $___?

Simon Pause Corporation bonds have a zero-coupon rate, mature in
ten years, and have a current yield to maturity of 5% annual rate,
compounded semiannually.
a. What is the price per $100 of face value of Simon Pause
Corporation bonds?
b. Suppose in three years the market price of the bond is
66.11178 per $100 of face value. What will the yield to maturity be
at that time?
c. Suppose you purchased the Simon Pause bond today and sold the...

A)
As with most bonds, consider a bond with a face value of $1,000.
The bond's maturity is 22 years, the coupon rate is 12% paid
annually, and the discount rate is 12%.
What is this bond's coupon payment?
B)
A bond offers a coupon rate of 14%, paid semiannually, and has a
maturity of 6 years. Face value is $1,000. If the current market
yield is 5%, what should be the price of this bond?

Finance Group offers 7.25 percent coupon bonds with semiannual
payments and a yield to maturity of 7.05 percent compounded
semiannually. The bonds mature in 11 years. What is the market
price per bond if the face value is $1,000? show the answer in
detail.

A bond that matures in 20 years has a $1,000 par value. The
annual coupon interest rate is 11 percent and the market's
required yield to maturity on a comparable-risk bond is 15
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?
The value of this bond if it paid interest annually would be
$_
The value of this bond if it...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 10 minutes ago

asked 15 minutes ago

asked 39 minutes ago

asked 42 minutes ago

asked 47 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago