2/ AAA bonds have a 120 semesters maturity, $5 million par value, and a 9.5%coupon paid quarterly, and those bonds sell currently for $4.8 million. BBB bondshave the same risk, maturity, and par value, but the BBB bonds pay a 7.75%monthly coupon. At what price should the monthly payment bond sell?

Answered: Image /qna-images/answer/57f9cf5c-af72-4933-8c87-f336549923a7.jpg

Answered: 2/ AAA bonds have a 120 semesters…

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

Doisneau20-year bonds have an annual coupon interest of8 percent, make interest payments on a semiannual basis, and have a $1,000par value. If the bonds are trading with a market's required yield to maturity of18 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds?
(Related to Checkpoint 9.3) (Bond valuation) Doisneau 22-year bonds have an annual coupon interest of 15 percent, make interest payments on a semiannual basis, and have a $1,000 par value. If the bonds are trading with a market's required yield to maturity of 12 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds? a. If the bonds are trading with a yield to maturity of 12%, then (Select the best choice below.) A. the bonds should be selling at a premium because the bond's coupon rate is greater than the yield to maturity of similar bonds. B. there is not enough information to judge the value of the bonds. OC. the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds. OD. the bonds should be selling at a discount because the bond's coupon rate is less than the yield to maturity of similar bonds. b. The price of the bonds is $(Round to the nearest cent.)
Dakota Corporation 15-year bonds have an equilibrium rate of return of 8 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate is 3.50 percent. The security’s liquidity risk premium is 0.25 percent and maturity risk premium is 0.85 percent. The security has no special covenants. Calculate the bond’s default risk premium. (Round your answer to 2 decimal places.)
Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1,000. The bonds are callable at $1,255. One-year interest rates are 8 percent. There is a 60 percent probability that long-term interest rates one year from today will be 9 percent, and a 40 percent probability that they will be 7 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.) Coupon rate %
A company is trying to issue a 15-year, BB-rated, semi-annual paying bond with 6% annual coupon rate. If the appropriate annual discount rate for the bond issuance is 3% and the current credit risk premium for BB-rated bond is 3.5%, what is the current market price of this bond? $952.55 $852.25 $1011.36 $1213.25
Doisneau 20 year bonds have an annual coupon interest of 7 percent, make interest payments on a semiannual basis, and have a$1,000 par value. If the bonds are trading with a market's required yield to maturity of 12 percent, are these premium or discount bonds? Explain your answer. What is the price ofthe bonds?
UTT Corporation's bonds have a 15-year maturity, a 7.25% annual coupon rate, and a par value of $1,000. The discount rate is 7.50%, based on semiannual compounding. What is the bond's price? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16)
McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 10% coupon paid semiannually (5% each 6 months), and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par value, but the p bonds pay a 10% annual coupon. Neither bond is callable. At what price should the annual payment bond sell? Select the correct answer. Oa. $992.23 b. $989.21 O c. $986.19 Od. $980.15 e. $983.17
If the real rate of interest is 2%, inflation is expected to be 3% during the coming year, and the default risk premium, illiquidity risk premium, and maturity risk premium for the Bonds-R-Us Corporation are all 1% each, what would be the yield (stated rate) on a Bonds-R-Us bond?
Kebt Corporation's Class Semi bonds have a 15-year maturity and a 7.25% coupon paid semiannually (3.625% each 6 months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell? Do not round your intermediate calculations. a. $988.31 b. $1,000.00 c. $1,035.90 d. $678.87 e. $992.53
Sanford Corporation's bonds currently sell for $798.70 and have 10 yars to maturity. The bonds have a coupon interest rate of 5% paid Annually. What is the Yield to Maturity (YTM) on the bonds? 5% 7% 8% 9%
a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.

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

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