UF issued a 20-year bond that pays a semi-annual coupon of $32.00, has a par value of $1,000, and a nominal annual yield-to-maturity of 7.639 percent. This bond can be called in 5 years, and the nominal annual yield-to-call is 10.32 percent. Determine the call premium for this bond.

UF issued a 20-year bond that pays a semi-annual coupon of $32.00, has a par value of $1,000, and a nominal annual yield-to-maturity of 7.639 percent. This bond can be called in 5 years, and the nominal annual yield-to-call is 10.32 percent. Determine the call premium for this bond.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EB: Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual...

See similar textbooks

Related questions

Q: Fingen's 15-year, $1,000 par value bonds pay 15 percent interest annually. The market price of the…

A: Yield to maturity refers to the internal rate of return which is earned by the investor who makes…

Q: Fingen's 11-year, $1,000 par value bonds pay 11 percent interest annually. The market price of the…

A: Time Duration = 11 years Par Value = $1,000 Coupon Rate = 11% Market price = $1,110 The required…

Q: UF issued a 20-year bond that pays a semi-annual coupon of $32.00, has a par value of $1,000, a…

A: Call Premium:It represents the excess amount over the face value/par value of a bond that the issuer…

Q: The sisyphean company has a bond outstanding with a face value of $1,000 that reaches maturity in 15…

A: The objective of this question is to calculate the Yield to Maturity (YTM) for a bond. The YTM is…

Q: Channel Marker Ships (CMS) has a 14-year callable bond with a $1,000 face value and a call value, or…

A: given, n = 14 par=$1000 price= $886 call price= $1070 called year= 6 m=2

Q: The Sisyphean Company has a bond outstanding with a face value of $5,000 that reaches maturity in…

A: Price of bond = Coupon Amount * PVAF ( rate, number of periods ) + Face Value * PVIF ( rate, number…

Q: e 13-year, $1,000 par value bonds of Waco Industries pay 8 percent interest annually. The market…

A: Price of bond is the present value of coupon payments plus present value of the par value of bond…

Q: A five-year, 5.0% bond with a YTM of 6.5% has a duration of 4.53 and convexity of 26.26. The bond's…

A: The percentage change in the price of the bond for every 1% change in the bond's YTM is the duration…

Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 10…

A: Compound = Semiannually = 2face value = fv = $1000Time = t = 10 * 2 = 20Coupon rate = c = 8.2 / 2 =…

Q: Kinight, Inc., has issued a 3 year bond that pays a coupon rate of 6.10% coupon payments are made…

A: Excel Spreadsheet:

Q: Fingen's 14-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the…

A: Yield to maturity is the rate of return that a bondholder will get if they invest in bond and the…

Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 15…

A: Following details are given in the question : Face value = $1000 Coupon rate = 8.3% Time period =…

Q: Calculate the yield to maturity on the following bonds. A 9 percent coupon (paid semiannually)…

A: Dear student, as per Bartleby answering guideline, if a student post multiple question then an…

Q: Blossom, Inc., has issued a three-year bond that pays a coupon rate of 6.0 percent. Coupon payments…

A: Bonds are a kind of debt financial instrument which is a fixed-income investment vehicle that…

Q: The 18-year, $1,000 par value bonds of Waco Industries pay 6 percent interest annually. The market…

A: Given information,Number of years: yearsPar value: Coupon rate: Market price: Market yield: To…

Q: Severn Company’s bond has four years remaining to maturity. Interest is paid semiannually, the bonds…

A: YTM is return to investors by holding bonds till the maturity. YTM depends upon the current price of…

Q: A 14-year, $1,000 par value Fingen bond pays 6% interest annually (assume semi- annual payments).…

A: Bond price refers to the current market value of a bond, which is determined by the present value of…

Q: A 30-year bond pays interest semiannually, has a par value of $1,000, a coupon rate of 15%, and has…

A: Given: Particulars Amount Par value (FV) 1000 Coupon rate 15% Years 30 Market rate 7%

Q: The S.Alam Company bond currently sells for $955, has a 12% coupon rate and a $1,000 par value, pays…

A: Bonds are debt securities issued by Government or other companies, who seek to raise money from…

Q: Calculate the yield to maturity on the following bonds. A 9 percent coupon (paid semiannually)…

A: Given We need to find the YTM for 3 different bonds and we will use the RATE formula in Excel. If…

Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 10…

A: Hence, the semi -annual interest payment is $44.5.The semi- annual interest payment is calculated by…

Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 9…

A: Given, Face value of bond is $1,000 Maturity is 9 years Coupon rate is 8.2%.

Q: The Salem Company bond currently sells for $848.55, has a coupon interest rate of 14% and a $1000…

A: Given:

Q: Calculate the Macaulay duration of an 8 percent, $1,000 par bond that matures in four years if the…

A: Modified duration = Duration / (1 + Ytm / n)

Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 5…

A: Given Information, Face Value of the bond = $1000 Maturity = 5 years Coupon Rate = 8.7% Coupon…

Q: The face value of the bond is $10,000 with annual coupon payment. The maturity period is 6 years…

A: The bond duration is used to measure the actual time it takes for the bond to recover its costs…

Q: Cardoza issues bonds with a coupon rate of 7%, face value of $210,000, and maturity in 10 years.…

A: Solution:- Calculation of the issue price of the bonds as follows under:-

Q: Alexia properties is issuing a bond at a current price of $949.9516, a maturity value of $ 900 and…

A: The coupon rate is the rate of interest paid by the borrower on the face value of the bond.

Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8…

A: The bond price is calculated as the present value of coupon payments and face value

Q: The face Value of the 8.5% bond is $1,000 with a maturity period of 5 years. The bond is selling…

A: Bond duration is referred as the method of measurement for how much the bond prices, which used to…

Q: Calculate the yield to maturity on the following bonds: A 9.4 percent coupon (paid semiannually)…

A: Using Excel formula:=RATE(nper, pmt, -pv, fv) * CompoundWhereRate = Yield to Maturitynper = Timepmt…

Q: A 10-year bond with a $1,000 face value has a coupon rate of 8 percentpaid semiannually. If current…

A: Bonds are fixed-income assets that serve as a representation of investor loans to borrowers…

Question

100%

UF issued a 20-year bond that pays a semi-annual coupon of $32.00, has a par value of $1,000, and
a nominal annual yield-to-maturity of 7.639 percent. This bond can be called in 5 years, and the
nominal annual yield-to-call is 10.32 percent. Determine the call premium for this bond.
O $30
O $40
O $70
$60
O $50

Expert Solution

Step 1

Calculation of current price:

Par value = $1000

Semi-annual coupon = $32

Annual YTM = 7.639%

Semi-annual YTM = 7.369 / 2 = 3.8195%

Time to maturity = 20 years

Semi-annual time = 20*2 = 40

Current Price = $32 * PVIFA(3.8195%, 40) + $1,000 * PVIF(3.8195%, 40)

Current Price = $[\frac{32 * (1 - {(1.038195)}^{- 40}}{0.038195}] + [\frac{1000}{{(1.038195)}^{40}}]$

= $874.0201

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
UF issued a 20-year bond that pays a semi-annual coupon of $32.00, has a par value of $1,000, and a nominal annual yield-to-maturity of 7.639 percent. This bond can be called in 5 years, and the nominal annual yield-to-call is 10.15 percent. Determine the call premium for this bond. OOO OO $30 $40 $60 $70 $50
A 14-year, $1,000 par value Fingen bond pays 6% interest annually (assume semi- annual payments). The price of the bond is $1,100 and the market's required yield to maturity on a comparable-risk bond is 5.50%. a. Compute the bonds yield to maturity. b. Determine the value of the bond to you, given your required rate of return (the YTM on a comparable-risk bond). c. Should you purchase the bond? a. b. Coupon rate Par (FV) Years (n) m PMT PV (price) YTM Coupon rate Par (FV) Years (n) m PMT PV (price) YTM 6.0% $1,000 14 2 $30 Calculation $1,100 6.0% $1,000 14 2 $30 Calculation Note: if you want PV to be a positive number, you must use a minus sign for both pmt and FV 5.50%
A 17-year bond pays interest of $45 every six months and will mature for $1,000. Also assume that the yield to maturity on this bond is currently 7.82 percent. Given this information, determine the current price of this bond. $1,103.15 O $1,095.23 $1.080.83 O $1,109.94 O $1,087.79
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 9 years. The bond certificate indicates that the stated coupon rate for this bond is 8.2% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 9.3%, then this bond will trade at: A. a discount. B. a premium. C. par. D. none of the above
A 7-year, 10% annual-pay bond has a par value of $1,000. If its yield-to-maturity (YTM) is 12.4%, the amount earned from reinvestment of the coupon payment is closest to A. $239.47. B. $321.41. C. $480.06. D. $500.79.
The 7-year $1,000 par bonds of Vail Inc. pay 8 percent interest. The market’s required yield to maturity on a comparable-risk bond is 5 percent. The current market price for the bond is $1,080. A. Determine the yield to maturity. B. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? C. Should you purchase the bond at the current market price ? A. What is your yield to maturity on the Vail bonds given the current market price of the bonds? Round to two decimal places
The 13-year $1 comma 000 par bonds of Vail Inc. pay 12 percent interest. The market's required yield to maturity on a comparable-risk bond is 15 percent. The current market price for the bond is $ 890. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable - risk bond? c. Should you purchase the bond at the current market price?
The 12-year $1 comma 000 par bonds of Vail Inc. pay 13 percent interest. The market's required yield to maturity on a comparable - risk bond is 16 percent. The current market price for the bond is $910. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable - risk bond? c. Should you purchase the bond at the current market price?
Emma bonds will mature in eight years; the coupon rate of the bond is 6% paid semiannually. If the appropriate discount rate is 4%, what is the value of the bond? O a. $1073.25 O b. $1135.78 O. $1543.11 O d. $1293.02
the 15-year $1,000 par bonds of Vail Inc. pay 15 percent interest. The market's required yield to maturity on a comparable - risk bond is 18 percent. The current market price for the bond is $910. a. determine the yield to maturity b. what is the value of the bonds to you given the yield to maturity on a comparable - risk bond? c. should you purchase the bond at the current market price?