A company issued bonds with a par value of $250,000 and a maturity of 25 years. TheBonds pay interest every six months based on a nominal interest rate of 8% per year. If on the date ofissuance of the bonds the market rate (yield) is 10%:a. What will be the selling price of the bonds?b. If after 15 years the company retires the bonds, paying the amount of $225,000, how much will thegain or loss on debt retirement?Go back and assume that the market rate is 5.75%.a. What will be the selling price of the bonds?b. Make the journal entry to recognize interest expense in the third six-month period of the bonds.Assume that the bonds do NOT pay periodic interest.a. What will be the selling price of the bonds?b. Make the journal entry to recognize interest expense in the third year of the bonds.

Price of bond is the present value of par value of bond and present value of the coupon payment…

A company issued bonds with a par value of $250,000 and a maturity of 25 y Bonds pay interest every six months based on a nominal interest rate of 8% p issuance of the bonds the market rate (yield) is 10%: a. What will be the selling price of the bonds? b. If after 15 years the company retires the bonds, paying the amount of $225 gain or loss on debt retirement? Go back and assume that the market rate is 5.75%. a. What will be the selling price of the bonds?

A company issued bonds with a par value of $250,000 and a maturity of 25 y Bonds pay interest every six months based on a nominal interest rate of 8% p issuance of the bonds the market rate (yield) is 10%: a. What will be the selling price of the bonds? b. If after 15 years the company retires the bonds, paying the amount of $225 gain or loss on debt retirement? Go back and assume that the market rate is 5.75%. a. What will be the selling price of the bonds?

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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3. On January 1, Russel Corp. issued 8-year bonds with a face value of $100,000 and a stated annual coupon rate of 6%, payable semiannually on June 30 and Dec. 31 of each year. The bonds were sold to yield an annual effective market rate of 8%. Present values interest factors from time-value-of-money tables are shown below. Note: If you use financial calculators or Excel instead of the interest factors, the rounding error could be as much as $10. These bonds will sell for a total price of: (A) $88,356 (B) $99,983 (C) $112,544 (D) $81,330 (E) None of the above.
A company issues a ten-year bond at par with a coupon rate of 6.6% paid semi-annually. The YTM at the beginning of the third year of the bond (8 years left to maturity) is 8.6%. What is the new price of the bond? O A. $1.240 O B. $886 O C. $1,063 O D. $1,000
Boxer Corp is issuing $600,000 8% 5 year bonds when bond investors want a return of 10%. Interest is payable semiannually Caculate Present Value of Bond Calculate Present Value of Interest Payments What is selling price of bond? did the bond sell at face value discount or premium?
Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is a. 5 percent. b. 15 percent. Solution: Present Value of Interest Payments PVA = A × PVIFA (n = 50, i = 5%) Present Value of Interest Payments PVA = A × PVIFA (n = 50, i = 15%)
1. Joe's Swim Company has $1,000 par value bonds outstanding at 12% interest. The bonds will mature in 50 years. Compute the current price of the bonds if the percent yield to maturity is 14%. 2. What percent of the total bond value does the repayment of principal represent?
MCQ: Legacy Inc. recently issued bonds that mature in 10 years. They have a par value of $1,000 and annual coupon of 6%. The current market interest rate is 8.5%. Assume that the bonds can be recalled at end of year 5 at $1,250. What will be the price of bonds? Select one: a. 833.82 b. 1067.75 c. 1130.95 d. 835.97 e. 582.73
Barry's Steroids Company has $1,000 par value bonds outstanding at 16 percent interest. The bonds will mature in 40 years If the percent yield to maturity is 12 percent, what percent of the total bond value does the repayment of principal represent? Assume interest payments are annual Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Principal as a percentage of bond price
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.
A bond has the following terms: Principal amount $1,000 Semi-annual interest $45 Maturity 15 years a. What is the bond's price if comparable debt yields 11%? b. What would be the price if comparable debt yields 11% and the bond matures after ten years? c. What would be the bond's price in a. and b. if interest rates declined to 8 % ?

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