New Business Ventures, Incorporated, has an outstanding perpetual bond with a coupon rate of 11 percent that can be called in one year. The bond makes annual coupon payments and has a par value of $1,000. The call premium is set at $125 over par value. There is a 60 percent chance that the interest rate in one year will be 13 percent, and a 40 percent chance that the interest rate will be 9 percent. If the current interest rate is 11 percent, what is the current market price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current market price

New Business Ventures, Incorporated, has an outstanding perpetual bond with a coupon rate of 11 percent that can be called in one year. The bond makes annual coupon payments and has a par value of $1,000. The call premium is set at $125 over par value. There is a 60 percent chance that the interest rate in one year will be 13 percent, and a 40 percent chance that the interest rate will be 9 percent. If the current interest rate is 11 percent, what is the current market price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current market price

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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Taussig Corp.'s bonds currently sell for $1,220. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,050. What rate of return should an investor expect to earn if he or she purchases these bonds?
Madsen Motors's bonds have 15 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 7%, and the yield to maturity is 10%. What is the bond's current market price? Round your answer to the nearest cent. $
Jimmy has a bond with a $1,000 face value and a coupon rate of 8.25% paid semiannually. It has a five-year life. If investors are willing to accept a 12 percent rate of return on bonds of similar quality, what is the present value or worth of this bond? Show your work. What is the impact of paying interest semi-annually rather than annually? Explain.
Lightning Electric’s outstanding bond has a $1000 maturity value and a 4.5 percent coupon rate of interest (paid semiannually). The bond, which was issued five years ago, mature in 10 years. If investors require a return equal to 6 percent to invest in similar bonds, what is the current market value of Lightning’s bond?
A bond matures in 15 years and pays an 8 percent annual coupon. The bond has a face value of $1,000 and currently sells for $985. What is the bond’s current yield and yield to maturity? . The face value for WICB Limited bonds is $250,000 and has a 6 percent annual coupon. The 6 percent annual coupon bonds matures in 2035, and it is now 2020. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 10 percent. How much should Karen sell her bonds today? What is the semi-annual coupon bond’s nominal yield to maturity (YTM), if the years to maturity is 15 years, and sells for 119% with coupons rate of 10%? Assume the par value of the bond is $1,000. MJI Corporation bonds mature in 6 years and have a yield to maturity of 8.5 percent. The par value of the bonds is $1,000. The bonds have a 10 percent coupon rate and pay interest on…
New Business Ventures Inc. has an outstanding perpetual bond with a 11 percent coupon rate that can be called in one year. The bond makes annual coupon payments. The call premium is set at $140 over par value. There is a 35 percent chance that the interest rate in one year will be 13 percent, and a 65 percent chance that the interest rate will be 8 percent. If the current interest rate is 11 percent, what is the current one-year market price of the bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Price $
Ten bonds are purchased for $9,598.13 and are kept for 5 years. The bond coupon rate is 7% per year, payable semiannually. Immediately following the owner's receipt of the last coupon payment, the owner sells each bond for $50 less than its par value (price discount). The owner will invest in the bonds if the effective annual yield is at least 9%.What is the face value of each bond?______
Bill Magness wants to purchase ERCOT bonds which are maturing in 15 years and yielding 3.87%. These ERCOT bonds have an annual coupon rate of 4.59% and a par value of $5,000. If the ERCOT bonds pay coupons twice per year, how much will Bill Magness have to spend to purchase one ERCOT bond? Note: the next coupon will be paid in exactly 6 months. a. $5,514.90 b. $5,406.76 c. $5,677.10 d. $5,190.49 e. $5,028.29
ELECTRON Computers just issued a bond that matures in 8 years. Its par value is equal to $1,000 and its coupon rate is equal to 7.5%. Interest payments are made annually. The yield to maturity on the bond is 7%. a. This type of bond is called: OYield bond OCoupon bond ODiscount bond b. Calculate the value of the coupon payment. Coupon payment = $ c. Calculate the value of the bond today. Use two decimal places and report a positive number. VB = $
A Boba Drinks LLC. is considering to issue perpetual, callable bonds with a coupon rate of 5% paid annually, and a par value of $1,000. The nominal interest rate on these bonds will be 8% for the next year. Within a year, the nominal rate on the bonds will be either 12% with probability 0.7, or 9% with probability 0.3. The bonds are callable at $1400. If the bonds are called and the interest rate decreases, what is the price of the callable bond today?
Bhuptbhai
Old Business Ventures Inc. has an outstanding perpetual bond with an 5.8 percent coupon rate that can be called in one year. The bonds make annual coupon payments. The call premium is set at $104 over par value. There is a 40 percent chance that the interest rate in one year will be 6.8 percent and a 60 percent chance that the interest rate will be 3.8 percent. If the current interest rate is 5.8 percent, what is the current market price of the bond? What will be the value of the call provision? (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.) Price of the bond Value of the call provision $ $

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