am. 161. Q#6 Assume that your company currently has the following characteristics:D/V = .20Rf = 3%E/V = .80Beta =1.20Market Risk Premium = 5.0%tax rate = 30%In addition, you obtain the following data about the company's bond. The company's 25 yearbond is trading in the market place at 85% of par. The bond carries a coupon rate of 6% andpays interest semi-annually.A. Estimate the current cost of debt and equity of the company.B. Estimate the WACC of the company.

A) Estimate the current cost of debt and equity of the company:Step 1:Cost of Debt (Kd):…

Answered: Q#6 Assume that your company currently…

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 7DTM

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1. If you invest in a $1,000 bond and pay a price of $832, and the coupon rate on the bond is 4%, what is your “Current Yield” on your investment?:a. It is 4.81%. b. 5.67%c. 3.21%d. 4.29%
Question 1 (1 point) The prices of a number of $1,000 (face value) zero coupon bonds are provided in the table below. Compute the yields on the zero coupon bonds. Plot the yield curve. What is the shape of the yield curve? Maturity Price Yield 1 year $965.35 k1 2 years $923.24 k₂ 3 years $885.25 k3 4 years $822.10 k₁ upward sloping downward sloping v-shaped flat
Please help me understand how to answer the last equation?
N = ?, I/Y = ?, PV = ?, PMT = ?, FV= ? %3D GAT, Inc. has issued a $1,000 par 4% coupon bond that is to mature in 18 years. If your required rate of return is 6.5%, what price would you be willing to pay for the bond?
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Q2. Duration and Convexity Bond A has face value at $1,000, coupon rate of 6% paid semi-annually, 5 years to maturity, and a yield to maturity of 7%. a. Using the bond pricing formula, calculate the price of the bond and duration. ABC b. Calculate the convexity of the bond. c. Using the calculations from above, what is the "approximated bond price change" using duration and convexity, if the interest rate increases by 1%? d. What is the actual change in the bond price if the interest rate increases by 1%? e. Based on c) and d) above, discuss the roles of duration and convexity in estimating the price change. Which risk measure plays a bigger role? f. Suppose you have two bonds with the same maturity date but one bond has a 10% coupon rate while the other has a 5% coupon rate. Which of these two bonds would have a higher duration?
#9!
Question 1/[a]. Consider some bonds with one annual coupon payment of 7.25%. Thebonds have a par value of $1,000, a current price of $1,125, andthey will mature in 13 years. What is the yield to maturity onthese bonds? [a]. Couponrate 7.25%…
Problem • Suppose the following zero-coupon bonds are trading at the prices shown below per $100 face value. • Determine the corresponding yield to maturity (rate of return) for each bond. Maturity 1 year Price $96.62 2 years 3 years 4 years $92.45 $87.63 $83.06
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What is the yield to maturity of a ten-year, $5,000 bond with a 4% coupon rate and semiannual coupons if this bond is currently trading for a price of $4,297? A. 8.23% OB. 7.06% C. 5.88% OD. 2.94% ******

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