11 years ago the Singleton Company issued 30-year bonds with a 12.5% annual coupon rate at their $1,000 par value. The bonds had a 7.5% call premium, with 3 years of call protection. Today Singleton called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. 13.77% 12.50% 7.50% 12.85%

11 years ago the Singleton Company issued 30-year bonds with a 12.5% annual coupon rate at their $1,000 par value. The bonds had a 7.5% call premium, with 3 years of call protection. Today Singleton called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. 13.77% 12.50% 7.50% 12.85%

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

See similar textbooks

Similar questions

7 Westco Company issued 11-year bonds a year ago at a coupon rate of 8.9 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 7.2 percent, what is the current bond price in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Weismann Company issued 15-year bonds a year ago at a coupon rate of 12 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 8 percent, what is the current bond price? Multiple Choice $593.35 $1,227.37 $1,670.52 $1,333.26 $ 1,343.26
ABC Company issued a $250,000 bond at the coupon rate of 2 percent payable semi-annually. Now, the bond has a remaining life of 4 years. i. Two years from now, you bought the ABC bond when the market interest rate for a new ABC bond is 4 percent. How much did you pay for the bond? ii. You sold the bond purchased in part i. after holding it for a year, when interest rates (for bonds of similar risk as ABC's bonds) fell to 3 percent. What is the percentage gain / loss on the bond? Illustrate your answer using the bond valuation equation.
Company X is rated A and has 3 bonds issued 2 years ago. All the bonds were issued at par. Bond A is a 6% 10-year bond with yield to maturity of 5% and par value of $100. Bond B is a callable bond and Bond C is a puttable bond, both with 10 years to maturity and par value of $100. All bonds pay coupons annually. (a) Compute the current price of Bond A. (b) Among the 3 bonds (A, B, and C), which bond should have the highest yield to maturity at the time of issue? Explain. (c) Among the 3 bonds (A, B, and C), which bond should have the lowest yield to maturity at the time of issue? Explain. (d) Company Y is rated BBB and plans to issue a new 10-year bond. In pricing this bond, determine whether the yield to maturity should be set higher or lower on its bonds relative to similar bonds by Company X. Explain your answer.
Problem #3: There is a bond on a company's books with an original term of 10 years that was purchased for a premium at its issuance, just over 2 years ago. The bond pays semi-annual interest. With the receipt of the latest coupon, the corresponding amount for amortization of the premium was $297.14. Exactly one year ago, the amount for amortization of the premium was $285.60. Based on the relation between subsequent amounts for amortization of the principal, what was the original value of the premium? Problem #3: Answer correct to 2 decimals.
Grossnickle Corporation issued 20-year, noncallable, 7.2% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.6%. What is the current price of the bonds, given that they now have 19 years to maturity? a. $1,237.42 b. $1,184.25 c. $1,194.73 d. $1,230.68 e. $1,189.63
Grossnickle Corporation issued 25-year, noncallable, 6.9% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 4.5%. What is the current price of the bonds, given that they now have 24 years to maturity? a. $1,392.90 b. $1,401.92 c. $1,347.89 d. $1,363.52 e. $1,355.88
West Corporation issued 12-year bonds 2 years ago at a coupon rate of 9.2 percent. The bonds make semiannual payments. If these bonds currently sell for 104 percent of par value, what is the YTM? Multiple Choice O 10.31% 7.74% 8.60% 4.30% 9,46%
Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 7.61 percent coupon rate and paid interest annually. It is now 12 years later. The current market rate of interest on the Bright Sun bonds is 11.08 percent. What is the current market price (intrinsic value) of the bonds? Round the answer to two decimal places.
Matterhorn Mountain Gear is evaluating two projects with the following cash flows: Year Project X Project Y 0 −$ 316,200 −$ 293,450 1 147,700 138,100 2 165,200 155,300 3 130,300 121,050 What interest rate will make the NPV for the projects equal?
YIELD TO CALL Seven years ago the Templeton Company issued 20-year bonds with an 11% annual coupon rate at their $1,000 par value. The bonds had a 7.5% call premium, with 5 years of call protection. Today Templeton called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. Explain why the investor should or should not be happy that Templeton called them.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS