1. Ten years ago, Marky Inc's 7.5% bonds were issued with a maturity of 20 years (annual coupons). They are currently trading at $1,013.03. Marky intends to issue new annual coupon bonds now with a maturity of ten years. When issued, these bonds will be set to trade at par. What coupon rate must be set on these new bonds to make them trade at par? Show all work including timelines, cashflows, equations, and all other work.

1. Ten years ago, Marky Inc's 7.5% bonds were issued with a maturity of 20 years (annual coupons). They are currently trading at $1,013.03. Marky intends to issue new annual coupon bonds now with a maturity of ten years. When issued, these bonds will be set to trade at par. What coupon rate must be set on these new bonds to make them trade at par? Show all work including timelines, cashflows, equations, and all other work.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1, 000. The bonds are callable at $1, 230. One year interest rates are 8 percent. There is a 60 percent probability that long-term interest rates one year from today will be 10 percent, and a 40 percent probability that they will be 8 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Let us assume that Hono Company has $1,000 par value bonds outstanding that have a 14 percent stated interest rate. The issue pays annual interest and it has twelve years remaining until maturity. If bonds of similar risk earn 10 percent, the firm's bond will sell for ________ today.
Problem: A company has issued three bonds (Par Value S1,000) with the following data: What happends to the bond prices as each bond approaches the maturity date? (assume similar bonds with 15 year maturity sell for 10% coupon rate and that this rate stays const. over time) Market rate 10% 5-years ago 10-years ago 25 year bond Issue date Maturity Coupon rate Coupon Payment Today 15 year bond 10% 20 year bond 7% 13% 70 100 130 15 15 15 Positive Values Positive Values Positive Values 6. 8. 9. 10 11 12 13 14
Vijay
One year ago, an annual coupon bond was issued by Company X with maturity period of 10 years at coupon rate of 8%. Face value of the bond is $1,000. The interest rate of similar kind of bonds in the market is 9.00%. What is the current price of the bond? a) $935.82 b) $1,000 c) $940.05 d) $949.67
(Bond valuation) Enterprise, Inc. bonds have an annual coupon rate of 8 percent. The interest is paid semiannually and the bonds mature in 8 years. Their par value is $1,000. If the market's required yield to maturity on a comparable-risk bond is 15 percent, what is the value of the bond? What is its value if the interest is paid annually? a. The value of the Enterprise bonds if the interest is paid semiannually is $ (Round to the nearest cent.)
1
A bond that matures in 1212 years has a $1 comma 0001,000 par value. The annual coupon interest rate is 1414 percent and the market's required yield to maturity on a comparable-risk bond is 1515 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?
1. An investor purchased a newly issued bond with a maturity of 10 years 150 days ago. The bond carries a coupon rate of 5% paid semi-annually and has a face value of $1,000. The price of the bond with accrued interest is currently $926.92. The investor plans to sell the bond 365 days from now. The schedule of coupon payments over the first two years, from the date of purchase, is as follows: Coupon Days after purchase Amount First 181 $25Second 365 $25Third 547 $25Fourth 730 $25 Assume that the risk-free rate is 6.0%. The no-arbitrage price at which the investor should enter into a forward contract is: a. $931.79 b. $929.54 c. $930.56
Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 7.61 percent coupon rate and paid interest annually. It is now 12 years later. The current market rate of interest on the Bright Sun bonds is 11.08 percent. What is the current market price (intrinsic value) of the bonds? Round the answer to two decimal places.

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