A firm issues five-year bonds with a coupon rate of 6.4%, paid semiannually. The credit spread for this firm's five-year debt is 0.8%. New five-year Treasury notes are being issued at par with a coupon rate of 3.3%. What should the price of the firm's outstanding five-year bonds be per $100 of face value? OA. $88.24 OB. $132.36 OC. $154.42 OD. $110.30

A firm issues five-year bonds with a coupon rate of 6.4%, paid semiannually. The credit spread for this firm's five-year debt is 0.8%. New five-year Treasury notes are being issued at par with a coupon rate of 3.3%. What should the price of the firm's outstanding five-year bonds be per $100 of face value? OA. $88.24 OB. $132.36 OC. $154.42 OD. $110.30

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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Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 10%. The firm then enters into an interest rate swap where it pays a LIBOR rate of 7% and receives a fixed 5.5% on notional principal of $100 million. What is the firm's effective interest rate on its borrowing? (Round your answer to 1 decimal place.) Answer is complete but not entirely correct. 8.0 Effective interest rate
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
3. The cash prices of 6-month and 1-year Treasury bills are 94.0 and 89.0. A 1.5-year bond that will pay coupons of $4 every 6 months currently sells for $94.84. A 2-year bond that will pay coupons of $5 every 6 months currently sells for $97.12. Calculate the 6-month, 1-year, 1.5-year, and 2-year zero rates.
Pa.2
Give typing answer with explanation and conclusion O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal annual, not semiannual yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $700. What is the bond's nominal coupon interest rate? a.6.15% b.6.58% c.4.86% d.5.72% e.7.01%
O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 20 years. Their nominal annual, not semiannual yield to maturity is 7.75%, they pay interest semiannually, and they sell at a price of $700. What is the bond's nominal coupon interest rate? Do not round your intermediate calculations. a. 4.77% b. 2.39% c. 2.30% d. 4.41% e. 4.60%
Smithson Co.'s Class A bonds have 10 years to go until maturity. They have a $1,000 face value and carry coupon rates of 8%. Approximately what do the bonds yield at the following prices? Assume bond coupons are paid semiannually. a. $770. b. $875. c. $1,000.
The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 12%. The corporate tax rate is 33 %. What would be the approximate after-tax cost of debt for a new issue of bonds? Note: Round your answer to 2 decimal places.
A company is going to undertake an issue of $100 million of high yield bonds, with a maturity of 5 years. The bonds are rated BB. The coupon on the bonds is 5%, paid semi-annually. The underwriter is charging a commission of 2%. What is the effective yield on the bonds, from the company's point of view? Group of answer choices 5.46 % 7.00% 5.75% 2.73%
A firm has some $1,000 par value bonds outstanding that pay a 12 percent interest rate. The bonds pay interest yearly and have 10 years until they mature. If bonds that bear similar risk currently earn 8 percent, how much will the firm's bond sell for today? A) $1,000 B) $805.20 C) $851.50 D) $1,268.20
(Bond valuation) Enterprise, Inc. bonds have an annual coupon rate of 8 percent. The interest is paid semiannually and the bonds mature in 8 years. Their par value is $1,000. If the market's required yield to maturity on a comparable-risk bond is 15 percent, what is the value of the bond? What is its value if the interest is paid annually? a. The value of the Enterprise bonds if the interest is paid semiannually is $ (Round to the nearest cent.)
Ordinary bonds issued by PIMCO have a current quoted price of $830.50. The PIMCO bond has a 5.7% annual coupon rate. The YTM = 8.15% and the PIMCO bonds pays coupon twice per year. If the next coupon will be disbursed in exactly 6 months, the PIMCO bond will mature in: a. 5.19 years b. 29.14 years c. 19.96 years d. 20.77 years e. 10.39 years

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