12. What is the annual coupon rate rounded to 2 decimal places if ABC Inc. recently issued a 20-year semi-annual coupon bond with a face value of $1,000. The market interest rate is 9 percent and is currently priced at $1,185.
12. What is the annual coupon rate rounded to 2 decimal places if ABC Inc. recently issued a 20-year semi-annual coupon bond with a face value of $1,000. The market interest rate is 9 percent and is currently priced at $1,185.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:12. What is the annual coupon rate rounded to 2 decimal places if ABC Inc. recently issued a 20-year
semi-annual coupon bond with a face value of $1,000. The market interest rate is 9 percent and
is currently priced at $1,185.
13. MJI Corporation bonds mature in 6 years and have a yield to maturity of 8.5 percent. The par
value of the bonds is $1,000. The bonds have a 10 percent coupon rate and pay interest on a
semi-annual basis. Assuming there are no changes to interest rates during the course of the
year, what are the current yield and capital gains yield on the bonds for this year?
14. XYZ Inc. issued 20-yr bonds which pay semi-annual coupons of $60 and is currently selling at
$1,000. The firm has decided to raise new funds using bond financing with maturity of 10 years,
par value of $1,000 and semi-annual coupons of $80. How many new bonds must XYZ Inc. issue
to raise a sum of $10,000,000 in case if we assume that both bonds have the same interest rate.
Rounded to the nearest whole number.
15. Bond Relationships. Select one or more of the following phrases to complete the following
sentences. increase , decrease, par, discount, premium, less than, more than, greater , less, fall,
rise
а.
If the current interest rate exceeds the bond's coupon rate, the bond will sell at a
b. The value of a bond to increase if there is a/an
in interest rates.
С.
A bond's coupon rate is more than the interest rate, therefore the bond is selling at a
d. As interest rate increases the value of a bond will
e. If the bondholder's required rate of return equals the coupon interest rate, the bond
will sell at
A premium bond sells for
g. The discount bond sells for
h. A bondholder with a short-term bond is exposed to
f.
as maturity approaches.
as maturity approaches.
interest rate risk than
when owing a long-term bond.
i.
When interest rates
the market required rates of return
and the
bond prices will
j.
If interest rates increase after a bond issue, the yield-to-maturity will
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