10-4 Suppose that five years ago Cisco Systems sold a 15-year bond issue that had aBond Valuation$1,000 par value and a 7 percent coupon rate. Interest is paid semiannually.If the going interest rate has risen to 10 percent, at what price would thebonds be selling today?b. Suppose that the interest rate remained at 10 percent for the next 10 years.What would happen to the price of Cisco's bonds over time?a.

MS-Excel --> Formulas --> Financials --> PV Therefore, the price of the bond is $769.41.

Answered: 10-4 Suppose that five years ago Cisco…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

See similar textbooks

Similar questions

6
2a. Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000. Suppose that one year later the going market interest rate drops to 6%. What is the new price of the bonds assuming that they now have 19 years to maturity? 2b. Suppose that one year after issue, the going market interest rate is 10% (rather than 6%). What would the price have been?
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. \table[[a. PV,,],[b. PV,,],[c1. PMT,,million],[c2. PMT,9.60,million]]
23. Calculating Investment Returns You bought one of Elkins Manufacturing Co.'s 5.4 percent coupon bonds one year ago for $1,030. These bonds make annual payments, mature eight years from now, and have a par value of $1,000. Suppose you decide to sell your bonds today, when the required return on the bonds is 5.1 percent. If the inflation rate was 2.9 percent over the past year, what would be your total real return on the investment?
Suppose Apple bonds had a deferred call provision that permitted the company (if desired) to call the bonds 10 years after the issue date with a call premium equal to 1 year of interest. When issued the bonds had 20 years to maturity, a coupon rate of 8%, and paid coupons semi-annually. After 1-year interest rates have fallen, causing the price to rise to $1422.52. What is the yield-to-call (YTC)? What is the Yield-to-maturity (YTM)?
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 12 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 10.4 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $6.2-per-share annual dividend forever? c. A company is planning to set aside money to repay $168 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. a. PV b. PV c1. PMT c2.PMT million 8.55 million
Suppose the coupon rate is 10% issue at par $1000 and for 15 years. Let say the market interest rate decreased to 5% after the bond was issued a) What is the interest payment for this bond annually b) What is the interest payment on semi-annually c) How much should the investors pay for this bondi.e. the value
3. Suppose that you observe the following two bonds being traded, both of which pay coupons annually and have a $100 face value: Bond Coupon Maturity Rate A B 6% 2% 30 years 30 years Price $147.13 $64.47 If the Law of One Price holds, what is the price of a 30-year Annuity that pays $8 per year starting at t = 1?
4. Suppose that an investment institution offers you two kinds of bonds and you are willing to take one of them. The first bond, called 'Bond A1' pays you $5000 in 10 years, while the second bond, called 'Bond B1' pays you the same amount but in 20 years. а. If the interest rate is 5%, what is the value of each bond today? Which bond is worth more? Why? b. If the interest rate increases to 8%, what is the value of each bond? Which bond has a larger percentage change in value? After knowing the answer of A and B, you will С. be able to complete this sentence: "The value of bond [rises / falls] when the interest rate increases, and bonds with longer time to maturity are [more/less] sensitive to changes in the interest rate"
Please help me
A 10-year government bond has face value of OR 200 and a coupon rate of 6% paid semiannually. Assume that the interest rate is equal to 8% per year. What is the bond’s price? What is the reason for the difference in price on an annual and semiannually basis? Discuss the role of financial managers.
Please answer question 1 without excel usage

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS