Problem 7-5 Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. a. PV b. PV c1. PMT million c2. PMT 9.60 million
Problem 7-5 Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. a. PV b. PV c1. PMT million c2. PMT 9.60 million
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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Question
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. \table[[a. PV,,],[b. PV,,],[c1. PMT,,million],[c2. PMT,9.60,million]]
Transcribed Image Text:Problem 7-5
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent.
a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid
annually.
b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever?
c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money
would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How
would your answer change if the money were deposited at the beginning of each year?
Note: Round your answers to 2 decimal places.
a. PV
b. PV
c1. PMT
million
c2. PMT
9.60 million
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