con-con&externalbrowser%-D0&launchUrl-https%253A%252F%252Fbb.johnston cc.edu%252Fwebapps%252Fpr16 Comprehensive Problem(s)Saved.Thirty-year B-rated bonds of Parker Optical Company were initially issued at a 16 percent yleld. After 5 years the bonds have beenupgraded to Aa2. Such bonds are currently yielding 14 percent to maturity. Use Table 16-2.Determine the price of the bonds with 25 years remaining to maturity.Price of the bondsedokatces Table 16-2 Interest rates and bond prices (face value Is $1,000 and annualcoupon rate is 12%)D.H.Rate in the Market (%)– Annual Yield to Maturity*2Years to Maturity8%10%12%14%16%$1,037.72$1,018.59$1,000.00$081.92$964.331561,345.84$1,153.72$1,000.00$875.91$774.8425$1,429.64$1,182.56$1,000.00$861.99$755.33=+PV(F2/2,AS2,-120/2,-1000)7.+PV(rate,nper,pmt[fv])

Price of the bonds is determined based on the yield to maturity rate and period.

Rate in the Market (%)-Annual Yield to Maturity* Years to Maturity 8% 10% 12% 14% 16% 1. $1,037.72 $1,018.59 $1,000.00 $981.92 $964.33 15 $1,345.84 $1,153.72 $1,000.00 $875.91 $774.84 25 $1,429.64 $1,182.56 $1,000.00 $861.99 $755.33 =+PV(F2/2,AS*2,-

Rate in the Market (%)-Annual Yield to Maturity* Years to Maturity 8% 10% 12% 14% 16% 1. $1,037.72 $1,018.59 $1,000.00 $981.92 $964.33 15 $1,345.84 $1,153.72 $1,000.00 $875.91 $774.84 25 $1,429.64 $1,182.56 $1,000.00 $861.99 $755.33 =+PV(F2/2,AS*2,-

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

con-con&externalbrowser%-D0&launchUrl-https%253A%252F%252Fbb.johnston cc.edu%252Fwebapps%252Fp
r16 Comprehensive Problem(s)
Saved.
Thirty-year B-rated bonds of Parker Optical Company were initially issued at a 16 percent yleld. After 5 years the bonds have been
upgraded to Aa2. Such bonds are currently yielding 14 percent to maturity. Use Table 16-2.
Determine the price of the bonds with 25 years remaining to maturity.
Price of the bonds
ed
ok
at
ces
<Prev
5 of 5
Next

Table 16-2 Interest rates and bond prices (face value Is $1,000 and annual
coupon rate is 12%)
D.
H.
Rate in the Market (%)– Annual Yield to Maturity*
2
Years to Maturity
8%
10%
12%
14%
16%
$1,037.72
$1,018.59
$1,000.00
$081.92
$964.33
15
61,345.84
$1,153.72
$1,000.00
$875.91
$774.84
25
$1,429.64
$1,182.56
$1,000.00
$861.99
$755.33
=+PV(F2/2,AS2,-120/2,-1000)
7.
+PV(rate,nper,pmt[fv])

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