2 years ago, UNCW realized they will face a financial shortfall if they do not issue bonds to cover their spending gap. They sold bonds with a coupon rate of 4% for 10 years. The bonds pay interest semi-annually. You bought the bonds 2 years ago at par value, but now you want to sell them because interest rates have gone up to 6% and you think you can earn more interest with a newer bond. What is the price you can sell these bonds today (2 years later than when issued)?

2 years ago, UNCW realized they will face a financial shortfall if they do not issue bonds to cover their spending gap. They sold bonds with a coupon rate of 4% for 10 years. The bonds pay interest semi-annually. You bought the bonds 2 years ago at par value, but now you want to sell them because interest rates have gone up to 6% and you think you can earn more interest with a newer bond. What is the price you can sell these bonds today (2 years later than when issued)?

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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Similar questions

In order to make CDs look more attractive than they really are, some banks advertise that their rates are higher than their competitors', but the fine print says that the rate is a simple interest rate. If a person deposits $15,000 at 7% per year simple interest, what compound interest rate would yield the same amount of money in 3 years? The compound interest rate that would yield the same amount of money in 3 years is 4.33 %.
You just bought a newly issued bond which has a face value of $1,000 and pays its coupon once annually. Its coupon rate is 6%, maturity is 20 years and the yield to maturity for the bond is currently 8%. Suppose that one year after you bought the bond, the yield to maturity of the bond declines to 7%. Find the (before-tax) total dollar return (dollar returns from the coupon payment and capital gains) for the one-year investment period.
Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 8.75% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Submit Answer format: Currency: Round to: 4 decimal places.
Silvia is thinking about investing money into a bond to diversify her investments. Company X issued 12 bonds at a face value of $43500 and a 17.5% nominal interest rate paid semiannually to raise capital for an upcoming factory expansion. The face value of the bond is $43500. The bond is a 10 year bond. As the bond was issued, the current nominal interest rate in the market is 7.0% compounded monthly. What is the maximum price Silvia should be pay for a single bond from company X?
don't use excel also can you show me maths solving with equation by hand please....
Your company wants to pay off some long-term debt, so you decide to buy back some conventional 10-year bonds that you issued 8 years ago. The par value of the bonds is $1200, and the bonds were issued at a 5% coupon rate. Currently, other companies with the same risk profile as your company are offering new 2-year bonds at an interest rate of 8%. Assume that you are at the start of year 9, i.e., the 8th interest payment has been made. What is a fair offer to buy back the bonds? Answer:
Cord cutting, a video company, provides services across the US, issued a 20 year bond five years ago. What will happen to CC bond price if the demand for video streaming increases compared to expectations 5 years ago? What will happen to CC bond price if inflation forecasts decrease from 4% to 1% compared to 5 years ago?
Suppose that over the next year, one of three things could happen to a company's credit rating. It could remain investment grade, drop to non-investment grade or default. The value of a credit derivative that pays $100 in 1-year if the company's credit rating remain investment grade is $93. The value of a credit derivative that pays $200 in 1-year if the company's credit rating drops to non-investment grade is $7. The value of a credit derivative that pays $300 in 1-year if the company defaults is $6. Calculate the risk-free rate and the risk-neutral probability of default. (answers to 4 decimal places)
California Resource Corporation has a bond outstanding with a coupon interest rate of 6 percent that will mature in 7 years. The investors who have purchased the bonds are requiring a rate of return of 11.41 percent! Compute the value of the bonds for the current investors. Earning a 11.41 percent rate of return is fantastic-sure beats government Treasury bond rates. So why would many investors choose not to invest in these bonds unless they can receive a really high rate of return for bonds?
Please show the complete and correct solution. Thank you
1.I want to have $2,000,000 saved by retirement. How much do I need to save each year for 40 years if the rate-of-return is 8%? 2.Company X is issuing bonds. They plan to issue 10,000, $1000 par, 6% bonds that pay semi-annual for 5 years. What are the proceeds from this bond sale if the market rate is 7%? 3.If I think I need $100,000 a year in retirement for 30 years, how much do I need at retirement if the rate-of-return is 8%? 4.Company X is issuing bonds. They plan to issue 10,000, $1000 par, 6% bonds that pay semi-annual for 5 years. If the bond price is $1020, what is the market annual rate-of-return? (percentage, 2 decimals, e.g. xx.xx)
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