Malcolm Technology issued a new series of bonds on January 1, 1985. They were sold at par ($1,000) have a coupon rate of 10% and mature in 20 years. Coupon payments are made semi-annually. (1) Interest rates had risen to 12% by 2000. What would the price of the bond be on December 31, 1995?
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Malcolm Technology issued a new series of bonds on January 1, 1985. They were sold at par ($1,000) have a coupon rate of 10% and mature in 20 years. Coupon payments are made semi-annually.
(1) Interest rates had risen to 12% by 2000. What would the price of the bond be on December 31, 1995?
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- In May 2000, the U.S. Treasury issued 30-year bonds with a coupon rate of 6.25%, paid semi-annually. A bond with a face value of $1,000 pays $31.25 (1,000 × 0.0625 / 2) every six months for the next 30 years; in May 2030, the bond also repays the principal amount, $1,000. 1. What is the value of the bond if, immediately after issue in May 2000, the 30-year interest rate increases to 7.5%? 2. What is the value of the bond if, immediately after issue in May 2000, the 30-year interest rate decreases to 5.0%? 3. On a graph in Excel, show how the value of the bond changes as the interest rate changes (plot the value as a function of the interest rate). At what interest rate is the value of the bond equal to its face value of $1,000?The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31, 2008. Coupon payments are made semi-annually (on June 30 and December 31). What was the YTM of Pennington’s bonds on January 1, 1979? What was the price of the bond on January 1, 1984, 5 years later, if the level of interest rates had fallen to 10 percent? c. On July 1, 2002, Pennington’s bonds sold for $916.42. What was the YTM at that date?Cosmos issued a new series of bonds on January 1, 1995. The bonds were sold at par ($1,000), had a 12% coupon, and mature in 30 years, on December 31, 2024. Coupon payments are made semiannually (on June 30 and December 31). What was the YTM on January 1, 1995?
- The Wellington Corporation issued a new series of bonds on January 1, 1991. The bonds were sold at par (Rs.1.000) have a 12 percent coupon, and mature in 30 years, on December 31, 2020. Coupon payments are made semiannually (on June 30 and December 31). a) What was the yield to maturity (YTM) of Wellington's bonds on January 1, 1991? What was the price of the bond on January 1, 1996, five year later, assuming that the level of interest rates had fallen to 10 percent? b) c) Find the current yield and capital gains yield on the bond on January 1, 1996, given the price as determined in (b) above. d) What was the price of the bond on July 1, 2014, assuming the level of interest rates had risen up to 14 percent? e) What were the current yield and capital gain yield on July 1, 2014?Thatcher Corporation’s bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8 percent coupon rate, paid semiannually. The price of the bond is $1,100. What is the firm’s cost (percentage rate) of borrowing money under these market conditions?The Lex Corporation issued a new series of bonds on January 1, 2000. These bonds were sold at par, have a 12 percent coupon and mature in 30 years, on December 31, 2029. Coupon payments are made on June 30 and December 31. Assume that you purchased an outstanding Lex bond on March 1, 2023, when the going rate of interest was 15.5 percent. How large a check must you have written to complete the transaction?
- Solve by Formula. Three years ago, ABC Company issued 10-year bonds that pay 5% semiannually. a. If the bond currently sells for $1,045, what is the yield to maturity (YTM) on this bond? b. If you are expecting that the interest rate will drop in the near future and you want to gain profit by speculating on a bond, will you buy or sell this bond? Why?A company is planning to issue perpetual, callable bonds with a coupon rate of 8% paid annually, and a par value of $1,000. The nominal interest rate on these bonds will be 9% for the next year. In one year, the nominal rate on the bonds will be either 10% with probability 0.6, or 8% with probability 0.4. The bonds are callable at $1200. Assuming the bonds are called if the interest rate decreases, what is the price of the callable bond today?Draiman Corporation has bonds on the market with 14.5 years to maturity, a YTM of 10.2 percent, a par value of $1,000, and a current price of $953. The bonds make semiannual payments. What must the coupon rate be on the bonds? (Hint: The coupon rate is always quoted as an annual rate! The coupon rate is calculated by adding up the total amount of payments in a year made by a bond, then dividing it by the face value of the bond.) Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Coupon rate %
- Suppose Hillard Manufacturing sold an issue of bonds with a 12-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. Suppose that 2 years after the issue date (as in part a) interest rates fell to 5%. Suppose further that the interest rate remained at 6% for the next 10 years. What would happen to the price of the bonds over time?Suppose Dillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 face value, a 10% coupon rate, and semiannual interest payments. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell? Suppose that 2-years after the issue date (as in part a) interest rates fell to 6%. Suppose further that the interest rate remained at 6%for the next 8 years. WAnhat would happen to the price of the bonds over time? ExplainYou issued debt in the form of bonds, with a face value of $1,000, and have 12 years until maturity. The bonds have an annual coupon rate of 8.4%, which are paid semiannually. a. The current price is $1,115. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) b. The tax rate is 25%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) a. Pretax cost of debt b. Aftertax cost fo debt % %
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