(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value. It matures in 20 years. The market's required yield to maturity on a comparable-risk bond is 6 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 5 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds.

(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value. It matures in 20 years. The market's required yield to maturity on a comparable-risk bond is 6 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 5 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount 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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(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 11-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $955, and the market's required yield to maturity on a comparable-risk bond is 6 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? % (Round to two decimal places.)
2:37 (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 16-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $1,075, and the market's required yield to maturity on a comparable-risk bond is 5 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? Vo) 1 [ 22 | 46 ... - 41% LTE2 a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? % (Round to two decimal places.) ||| = O
(Bond valuation relationships) Arizona Public Uslities issued a bond that pays $70 in interest, with a $1,000 par value. It matures in 30 years. The market's required yield to maturity on a comparable-sk bond is 8 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (4) decreases to 7 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 5 years instead of 30 years. Recompute your answers in parts a and b e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds. GALLE a. What is the value of the bond if the marker's required yield to maturity on a comparable-risk bond is 8 percent? $ 887 42 (Round to the nearest cent.) b. () What is the value of the bond if the market's required yield…
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 17-year, $1,000 par value bonds of Waco Industries pay 9 percent interest annually. The market price of the bond is $1,105,and the market's required yield to maturity on a comparable-risk bond is 6 percent a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond?
A bond has a $1,000 par, 5% coupon, Pak Treasury bond with 7 years’ maturity. Coupon interest payments are made semiannually and the next coupon payment is exactly six months away. The market interest rate is 6% (nominal rate with semiannual discounting).Required:a) Calculate the current price of this bonds assuming that 10 bonds are held to maturity. b) Explain why a company should consider bonds in its financing structure over other financing options.
3) The outstanding bonds of International Plastics mature in 6 years and pay semiannual interest payments of $33.50 on a $1,000 face value bond. The bonds are currently selling for $1,008.64. The coupon rate is percent, the current yield is s. Show all work and explain. percent, and the yield to maturity is percer
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 19-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The market price of the bond is $925, and the market's required yield to maturity on a comparable-risk bond is 14 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond?
(Bond valuation relationships) A bond of Visador Corporation pays $70 in annual interest, with a $1,000 par value. The bonds mature in 18 years. The market's required yield to maturity on a comparable-risk bond is 8.5 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 4 percent? c. Interpret your finding in parts a and b. Question content area bottom Part 1 a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 8.5 percent? $enter your response here (Round to the nearest cent.)
Evans Emergency Response bonds have 8 years to maturity. Interest is paid semiannually. The bonds have a $1,200 par value and a coupon rate of 9 percent. If the price of the bond is $1,093.52, what is the annual yield to maturity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Give the approximate yield to maturity for a $1,000 par value bond that is selling for $1,120 and that matures in 6 years. The bond pays 12 percent interest annually. And assume that a firm has $1,000 par value bonds outstanding that have a 14 percent stated interest rate. The issue pays annual interest and it has twelve years remaining until maturity. If bonds of similar risk earn 10 percent, the firm's bond will sell for ________ today.
A) BOND VALUATION: DeBond Industries has outstanding a $1,000 face-value bond with an8% coupon interest rate. The bond has 12 years remaining to its maturity date.a) If interest is paid annually, find the value of the bond when the required return is (1) 7%, (2)8%, and (3) 10%.b) Indicate for each case in part a whether the bond is selling at a discount, at a premium, or at itspar value.c) Using the 10% required return, find the bond’s value when interest is paid semiannually.B) AMORTIZATION: Suppose you borrow $1,200,000. You are going to repay the loan bymaking equal annual payments for five years. The interest rate on the loan is 12 percent per year.Prepare an amortization schedule for the loan. How much interest will you pay over the life of theloan? What fraction of the payment made at the end fourth year will represent repayment ofprincipal?
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) The 15-year $1,000 par bonds of Vail Inc. pay 13 percent interest. The market's required yield to maturity on a comparable-risk bond is 11 percent. The current market price for the bond is $1,060. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price? a. What is your yield to maturity on the Vail bonds given the current market price of the bonds? % (Round to two decimal places.) C

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