NikkIG's Corporation's 10-year bonds are currently yielding a return of 6.55 percent. The expected Inflation premium is 1.05 percent annually and the real risk-free rate is expected to be 3.10 percent annually over the next ten years. The liquidity risk premium on NikkIG's bonds is 0.40 percent. The maturity risk premium is 0.10 percent on 4-year securities and increases by 0.07 percent for each additional year to maturity. Calculate the default risk premium on NikkIG's 10-year bonds. (Round your answer to 2 decimal places.) Default risk premium

NikkIG's Corporation's 10-year bonds are currently yielding a return of 6.55 percent. The expected Inflation premium is 1.05 percent annually and the real risk-free rate is expected to be 3.10 percent annually over the next ten years. The liquidity risk premium on NikkIG's bonds is 0.40 percent. The maturity risk premium is 0.10 percent on 4-year securities and increases by 0.07 percent for each additional year to maturity. Calculate the default risk premium on NikkIG's 10-year bonds. (Round your answer to 2 decimal places.) Default risk premium

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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Drongo Corporation's 3-year bonds currently yield 4.7 percent and have an inflation premium of 2%. The real risk-free rate of interest, r', is 1.3 percent and is assumed to be constant. The maturity risk premium (MRP) is estimated to be 0.1%(t - 1), where t is equal to the time to maturity. The default risk and liquidity premiums for this company's bonds total 1.2 percent and are believed to be the same for all bonds issued by this company. If the average inflation rate is expected to be 5.4 percent for years 4, 5, and 6, what is the yield on a 6-year bond for Drongo Corporation? 6.1% 6.7% O 7.0% 5.8% O 6.4%
AEP has a 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 11 years from now?
Notting Hill Berhad issued 25-year bonds three years ago. The bonds are currently selling for 97 percent of par. The face value of the bond is RM1,000 per unit. However, upon maturity, the bondholders can redeem the bonds at a premium of 10% to the par value. The yield-to-maturity of the bond is 9 percent per annum. Assuming the coupon payment is paid quarterly, calculate the annual coupon rate of the bonds.
ABC Inc. is planning to issue new annual coupon bonds with a maturity of ten years. The company outstanding (annual coupon paying) bonds have a 7.5% coupon rate and mature in ten years. They are currently selling for $1,013.03. What would the coupon rate on the new bonds have to be such that they will sell at par upon issuance?
Copper Corp. has an outstanding bond issue that is currently selling for $1,073.95. The yield to maturity is 10.7%, and the bonds mature in 9 years. Assuming that the face value is $1000 and the bonds pay a semi-annual coupon, what is the current yield on the bonds? 7.8% 13.4% 11.2% 8.9%
NikkiG's Corporation's 10-year bonds are currently yielding a return of 6.70 percent. The expected inflation premium is 1.10 percent annually and the real risk-free rate is expected to be 3.40 percent annually over the next ten years. The liquidity risk premium on NikkiG's bonds is 0.20 percent. The maturity risk premium is 0.15 percent on 4-year securities and increases by 0.05 percent for each additional year to maturity. Calculate the default risk premium on NikkiG's 10-year bonds. Note: Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Default risk premium
Fingen's 16-year,$1,000 par value bonds pay14 percent interest annually. The market price of the bonds is $950 and the market's required yield to maturity on a comparable-risk bond is16 percent. What should be the value of the Fingen bonds given your required rate of return on a comparable bond? (Round to the nearest cent.)
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…
Russell Container Company has a $1,000 par value bond outstanding with 30 years to maturity. The bond carries an annual interest payment of $105 and is currently selling for $880 per bond Russell is in a 40 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk and maturity date will be similar. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. Compute the yield to maturity on the old issue and use this as the yield for the new issue Yield on new issue b. Make the appropriate tax adjustment to determine the aftertax cost of debt. Cost of debt.
Baghiben
A particular long-term corporate bond is quoted at 13.55%. Real risk-free rate is constant at 1% while liquidity risk premium is 1.50%. Maturity risk premium and default risk premium are 4.25% and 2%, respectively. Inflation is expected to be 2% and 4% for the next two years, and constant at 6% for the years after. How many years do this corporate issued bond will
A 10-year corporate bond yields 16.5%. The real risk-free rate is 2% which is projected to be constant indefinitely. The expected inflation for year 1 is 1%, for year 2 is 2%, and it will increase by 1% each year after. The default risk premium is twice the liquidity premium and they will remain the same regardless of the maturity year of the bond. Maturity Risk premium for long-term securities is computed as estimated to be 0.5%(t - 1), where t is the maturity of the bond.What is the difference between the yield or interest rate of a an 8-year Government issued bond and 8-year Corporate bond? a. 4.5% b. 1.5% c. 3% d. 5.5% The yield for an 11-year government bond is a. 13% b. 17.5% c. 6% d. 16%

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