1. XYZ Corporation issued a 5-year bond with a par value of P25,000 and pays a semi-annual coupon ofP1,250. The nominal yield would be?a. 7%d. 12%2. Currently, banks would offer an ordinary savings interest rate of 1% per annum. Additionally,inflation rate is expected to be 3.5%. You are considering a current bond issue in which yourassessment gives a default risk premium of 2%, liquidity premium of 3% and market risk premium of2.5%. Your required rate of return would be:а. 10%d. 13%3. (Using information in numbers 1 and 2). The price of the bond would be closest to:a. P 20,710d. P 24,058c. 11%f. 14%b. 10%е. 13%b. 11%c. 12%f. 15%e. 14%b. P 25,000e. P21,488с. Р 22,304f. P 23,160

Bonds are the liabilities of the company which is issued to raise the funds required to finance the…

Answered: XYZ Corporation issued a 5-year bond…

XYZ Corporation issued a 5-year bond with a par value of P25,000 and pays a semi-annual coupon of P1,250. The nominal yield would be? 7% a. b. 10% c. 11% d. 12% е. 13% f. 14%

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

1. XYZ Corporation issued a 5-year bond with a par value of P25,000 and pays a semi-annual coupon of
P1,250. The nominal yield would be?
a. 7%
d. 12%
2. Currently, banks would offer an ordinary savings interest rate of 1% per annum. Additionally,
inflation rate is expected to be 3.5%. You are considering a current bond issue in which your
assessment gives a default risk premium of 2%, liquidity premium of 3% and market risk premium of
2.5%. Your required rate of return would be:
а. 10%
d. 13%
3. (Using information in numbers 1 and 2). The price of the bond would be closest to:
a. P 20,710
d. P 24,058
c. 11%
f. 14%
b. 10%
е. 13%
b. 11%
c. 12%
f. 15%
e. 14%
b. P 25,000
e. P21,488
с. Р 22,304
f. P 23,160

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