A company must make a payment of $2500 in 5 years. Four-year zero coupon bonds and seven-year zero coupon bonds are available for investment. These bonds could be purchased in any quantity and the yield rate is 3% effective. Let A and B be the face values of the 4-year and 7-year zero-coupon bonds, respectively, that are purchased to satisfy full immunization against any changes in interest rates. Find A. Possible Answers A 1262 1431 C 1618 D 1725 E 1962

A company must make a payment of $2500 in 5 years. Four-year zero coupon bonds and seven-year zero coupon bonds are available for investment. These bonds could be purchased in any quantity and the yield rate is 3% effective. Let A and B be the face values of the 4-year and 7-year zero-coupon bonds, respectively, that are purchased to satisfy full immunization against any changes in interest rates. Find A. Possible Answers A 1262 1431 C 1618 D 1725 E 1962

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

I need the answer as soon as possible
(Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 12 percent interest annually and have 11 years until maturity. You can purchase the bond for $945. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 14 percent? Question content area bottom Part 1 a. The yield to maturity on the Saleemi bonds is enter your response here%. (Round to two decimal places.)
BroadStreet Bank has just been given a $10,000,000, 5 year CD deposit by the local municipality. The bank has agreed to pay 8%, compounded annually on this deposit. The bank wishes to choose one debt investment to cover this deposit, so that they have earnings from this investment to just cover the interest and CD principal when it comes due in 5 years. They are looking at the following 3 possibilities for investment: Bond Maturity Coupon YTM Duration1 5 0.00% 8.00% 5.002 6 7.90% 8.00% 5.003 7 17.15% 8.00% 5.00 • Show that each of three investment will cover the future payout required by the CD, even if market rates increase or drop by ½ % by the end of 5 years
Please provide whole answer: A company has a bond outstanding. Bond A has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $900 every six months over the subsequent eight years, and finally pays $1,300 every six months over the last six years. If the required return on this bond is 5.4% compounded semiannually, what is the current price of Bond A? What would be the price if the bond was compounded quarterly?
Show work and formula used to get to the answer. What is the cost of new AND existing debt if the current price of the bonds is $1,050? The bonds pay a semiannual coupon of $80 ($40 every six months), mature in 12 years, and have a face value of $1,000. The floatation cost for debt is 5%. Check the number of periods per year on your calculator.
Ma1. Please give only typed answer. You are considering buying a municipal bond with a 10-year life, a 1,000 par value, and will pay a coupon of 4% annually. You have an opportunity to buy the bonds at original issue (e.g., full 10-year life). Assuming you require a 8% rate of return, how much should you pay for the bond (i.e., how much is it worth)?
Show work and formula used to get to the answer. What is the cost of new AND existing debt if the current price of the bonds is $1,050? The bonds pay a semiannual coupon of $80 ($40 every six months), mature in 12 years, and have a face value of $1,000. The floatation cost for debt is 5%. Check the number of periods per year on your calculator.
Berk Bhd issues bonds that pay interest semi-annually and have maturities of 1 year and 30 years. The bonds have a face value of RM1,000 and an annual coupon rate of 10 percent. i) If investors have demanded an interest rate of 5 percent on the bond investment, what is the maximum prices to pay for the 1-year bond and 30-year bond? ii) Suppose that the interest rate has increased to 20%, calculate the values of the 1-year bond and 30-year bond.
Consider two bonds, S and T. Both bonds presently are selling at their par value of $100. Bond S will mature in 5 years whereas Bond T will mature in 6 years. If interest rates change such that the yield to maturity on both bonds goes from 6% to 8%, then ____________. Group of answer choices A) Both bonds will decrease in value but bond T will decrease more than bond S B) Both bonds will decrease in value but bond S will decrease more than bond T C) Both bonds will increase in value but bond S will increase more than bond T D) Both bonds will increase in value but bond T will increase more than bond S
Suppose tnat ABC bank decides to purchase a T-note and convert it into a STRIP. The T-note has a maturity of 6 years, pays a 6% coupon rate (semiannual) and a face value of $10,000. How many separate securities can be created? O 6O7O 12O13
What is the tex-equivalent interest rate needed if you purchase a municipal bond wiht a face value of %5000, a coupon rate of 4%, and a maturity date of 7 years? Assume you are in the 30% marginal federal tex bracket. 5.71% 3.30% 5.41% 7.21%
You will be paying $12,800 a year in tuition expenses at the end of the next two years. Bonds currently yield 8% Required: a. What are the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places) Present value Duration Answer is complete and correct. S 22.825 79 14000 years b. What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration to 4 decimal places and "Future redemption value to 2 decimal places.) Duration Future redemption value Answer is not complete. 14800 years