K(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 12-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 ona 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?a. What is your yield to maturity on the Waco bonds given the current market price of the bonds?% (Round to two decimal places.)

a) Bond Yeild to Maturity :Given : Term i.e NPER 12 Year Par Value i.e FV $1000 Coupon rate…

Answered: K (Related to Checkpoint 9.2 and…

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 9.3) (Bond valuation) Doisneau 18-year bonds have an annual coupon interest of 11 percent, make interest payments on a semiannual basis, and have a $1,000 par value. If the bonds are trading with a market's required yield to maturity of 14 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds? a. If the bonds are trading with a yield to maturity of 14%, then (Select the best choice below.) A. there is not enough information to judge the value of the bonds. B. the bonds should be selling at a discount because the bond's coupon rate is less than the yield to maturity of similar bonds. OC. the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds. OD. the bonds should be selling at a premium because the bond's coupon rate is greater than the yield to maturity of similar bonds.
Please explain both a and b
Radhubhai
Refer to Table 10-2. a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year time period. b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year period. c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own? multiple choice 1 10 Years 20 Years 25 Years d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own? multiple choice 2 10 Years 20 Years 25 Years
The 12-year $1,000 par bonds of Vail Inc. pay 8 percent interest. The market's required yield to maturity on a comparable-risk bond is 12 percent. The current market price for the bond is $850. 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? Question content area bottom Part 1 a. What is your yield to maturity on the Vail bonds given the current market price of the bonds? enter your response here% (Round to two decimal places.)
(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.)
(Related to Checkpoint 9.3) (Bond valuation) Doisneau 22-year bonds have an annual coupon interest of 8 percent, make interest payments on a semiannual basis, and have a $1,000 par value. If the bonds are trading with a market's required yield to maturity of 16 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds? Question content area bottom Part 1 a. If the bonds are trading with a yield to maturity of 16%, then (Select the best choice below.) A. the bonds should be selling at a premium because the bond's coupon rate is greater than the yield to maturity of similar bonds. B. there is not enough information to judge the value of the bonds. C. the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds. D. the bonds should be selling at a discount because the bond's coupon rate is less than the yield to maturity of similar…
Haswell Enterprises' bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 6%, based on semiannual compounding. What is the bond's price? Select the correct answer. a. $1,013.98 b. $1,018.60 c. $1,009.36 d. $1,016.29 e. $1,011.67
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?
A. Table below is information about three USD10000 par value bonds, each of which pays coupon semiannually. The required rate of return on each bond is 14%. Calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value. Bond Coupon Rate (%) Maturity (years) 1 8 5 2 14 10 3 16 15 B. Using the Interpolation Method to calculate the YTM for the below Bonds: > The par value USD18000 > Coupon Rate 10% every year > Maturity period 10 years > Market Value of bond USD21800
(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
(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $80 in interest, with a $1,000 par value. It matures in 25 years. The market's required yield to maturity on a comparable-risk bond is 7 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 () increases to 10 percent or (4) decreases to 6 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 25 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. a. What is the value of the bond if the markets required yield to maturity on a comparable-risk bond is 7 percent? $1,116.54 (Round to the nearest cent) b. () What is the value of the bond if the market's required yield to…

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