On January 1, 2020, ABC Corporation invested in P2,000,000 bonds of DEF Company that will mature on December 31, 2022. The bond has a coupon rate of 10% and a required rate of return of 12%. What is the value of the investment on January 1, 2020?
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A:
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4. On January 1, 2020, ABC Corporation invested in P2,000,000 bonds of DEF Company that will mature on December 31, 2022. The bond has a coupon rate of 10% and a required
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- Q1. A firm has just issued (January 1, 2019) a bond that has a face value of $1,000, a coupon rate of 6 percent paid semi-annually (June 30, December 31), and matures in 8 years. The bonds were issued with a yield to maturity of 7%. What price were the bonds issued at? Assume that on July 1, 2021, the bond trades to earn an effective yield of 10%. At what price should this bond be trading for on July 1, 2021? PRICE WHEN ISSUED: PRICE ON JULY 1, 2021:David Palmer identified the following bonds for investment: Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025. Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. David Palmer purchased Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (in another investment account). Calculate: i) the current yield, ii) the 2-year capital gains yield and iii) the 2-year total rate of return on investment…David Palmer identified the following bonds for investment: BondA: A$1millionpar,10%annualcouponbond,whichwillmature on July 1, 2025. Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. (a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR), calculate the market price of Bond A on July 1, 2011. [N ote: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.] (b) David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016…
- 3. On March 22, 2007 XYZ Ltd. issued corporate bonds with a face value of $1000, a coupon rate of 6% per year, and quarterly coupons. The bonds mature on March 21, 2027. What is the most you would pay for this bond today (March 22, 2021) if you wanted to earn a 12% APR on your investment? Draw a correct cash flow diagram.A $18,000 face value bond matures on August 3, 2024, and carries a coupon of 6.55%. It is sold on February 3, 2009, for $20,557.32. Determine the yield to maturity?CCI Inc. has a 9.85% bond that mature on March 15, 2034. Assume that the interest on these bonds is paid quarterly. With a face value of $1,000, what would the bond price be as of March 15, 2024 to an investor who holds the bond until maturity and requires an 10.25% rate of return?
- 1. 8990 Holdings, Inc. issued a bond on July 16, 2016 that matures in October 16, 2020. This means that the term of the bond is 5 years. Coupon payments will be made every quarter with a rate of 6.21% per annum. Assume that the face value is P10,000 and investor have required rate of return of 10%. The coupon payment per quarter would be? a. P621.00 b. P155.25 c. P310.50 d. P250.00 2. Using information in #1, the price for each unit of bond would be closest to? a. P10,000 b. P16,102.49 c. P8,522.93 d. P10,943.141. 8990 Holdings, Inc. issued a bond on July 16, 2016 that matures in October 16, 2020. This means that the term of the bond is 5 years. Coupon payments will be made every quarter with a rate of 6.21% per annum. Assume that the face value is P10,000 and investor have required rate of return of 10%. The coupon payment per quarter would be? a. P621.00 b. P155.25 c. P310.50 d. P250.00David Palmer identified the following bonds for investment: 1. 1) Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025. 2. 2) Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. 3. 3) Bond C: A S1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. (a) If Bond B is issued at face value and both Bond Band Bond A are having the same yield to maturity (EAR) at issuance, calculate the market price of Bond A on July 1, 2011.
- GHI Company issued a 7-year bond on January 2, 2020, with a par value of $550,000 and pays its investors cash interest payments semi-annually ( every six months). The market rate for this bond is 6% and the coupon rate is 5%. What is the present par value (PV) of the Face Value? For this Bond?Suppose GENERAL MILLS issued 1,250,000 bonds with the par value of $1000 and a coupon rate of 3.8% on June 1, 2021. The bonds include semi-annual coupon payments and are due on May 31, 2031. If the effective interest rate at issuance was 4%, how much capital was the Company able to raise? (in millions; Round your answer to the two decimal places.)On June 1st, 2020, Coca Cola (KO) issued bonds for one billion dollars. The bonds have a par value of $1,000, coupon rate of 2.75% payable semiannually, and 40 years maturity (maturity date: 6/1/2060). What is the average annual return for an investor who purchased these bonds at launch (6/1/20) for $970.30 and sold them three years later (6/1/23) for $681.83? HINT: Don’t divide HPR/3. Consider the effects of compounding. Find the annual interest rate that would make the initial investment of $970.30 become $681.83 after three years. -9.90% per year. -9.50% per year. -0.95% per year. +9.90% per year.
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