You have been hired to value a new 25-year, callable, convertible bond. The bond has a 7.10 percent coupon rate, payable annually. The conversion price is $153, and the stock currently sells for $38.50. The stock price is expected to grow at 12 percent per year. The bond is callable at $1,180, but based on prior experience, it won't be called unless the conversion value is $1,280. The required return on this bond is 9 percent. What value would you assign to this bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Bond value $813.37

You have been hired to value a new 25-year, callable, convertible bond. The bond has a 7.10 percent coupon rate, payable annually. The conversion price is $153, and the stock currently sells for $38.50. The stock price is expected to grow at 12 percent per year. The bond is callable at $1,180, but based on prior experience, it won't be called unless the conversion value is $1,280. The required return on this bond is 9 percent. What value would you assign to this bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Bond value $813.37

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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New Business Ventures Inc. has an outstanding perpetual bond with a 13 percent coupon rate that can be called in one year. The bond makes annual coupon payments. The call premium is set at $200 over par value. There is a 35 percent chance that the interest rate in one year will be 15 percent, and a 65 percent chance that the interest rate will be 12 percent. If the current interest rate is 13 percent, what is the current one-year market price of the bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) $1,033.48 x Price
You are considering the purchase of a $1,000 par value bond with a coupon rate of 4.2% (with interest paid semiannually) that matures in 12 years. If the bond is priced to yield 8%, what is the bond's current price? The bond's current price is $. (Round to the nearest cent.)
Singtel recently issued a graded investment bond. The bond has a $1,000 par value which will mature in 12 years’ time. It has a coupon interest rate of coupon of 11% and pays interest annually. As an investor, you are to determine the following: i. Calculate the value of the bond if the required rate of return is 11 percent. ii. Calculate the value of the bond if the required rate of return is 15 percent. iii. Based on the above findings in part (i) and (ii) above, and discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value. iv. Identify two possible reasons that could cause the required return to differ from the coupon interest rate.
The ARA Corporation bonds have a coupon of 14%, pay interest semiannually, and they will mature in 7 years. Your required rate of return for such an investment is 10% annually. Required: (a) How much should an investor pay for a $1,000 ARA Corporation bond? (b) Discuss reasons why an investor should choose to purchase bonds over stocks given his risk profile.
Your company currently has $1,000 a par, 5% coupon bonds with 10 years to maturity and a price of$1,085. If you want to issue new 10-year coupon bonds at par, what coupon rate do you need to set? Assume that for both bonds, the next coupon payment is due in exactly six months. You need to set a coupon rate of ______%. (Round to two decimal places.)
ABC Inc. is planning to issue new annual coupon bonds with a maturity of ten years. The company outstanding (annual coupon paying) bonds have a 7.5% coupon rate and mature in ten years. They are currently selling for $1,013.03. What would the coupon rate on the new bonds have to be such that they will sell at par upon issuance?
Taussig Corp.'s bonds currently sell for $1,220. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,050. What rate of return should an investor expect to earn if he or she purchases these bonds?
A 30-year, 8% semiannual coupon, $1,000 par value bond is selling for $1313.95 with an 5% yield to maturity. It can be called after 5 years at $1,250. What return would you earn when it's called? (please write down financial calculator registrars and your final answer clearly)
New Business Ventures Inc. has an outstanding perpetual bond with a 11 percent coupon rate that can be called in one year. The bond makes annual coupon payments. The call premium is set at $140 over par value. There is a 35 percent chance that the interest rate in one year will be 13 percent, and a 65 percent chance that the interest rate will be 8 percent. If the current interest rate is 11 percent, what is the current one-year market price of the bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Price $
You are considering the purchase of a Coupon Bond with a Face Value of $1,000, which matures in sixteen years, and pays 4.65% (annual) coupons. If the bond is trading in the market at $886.90, what is the Yield-to- Maturity (YTM) on the investment? (The answer is a percent, round your answer to two decimal places, e.g. 4.75) Numeric Response
you are interested in a corporate bond with a current market price of $973.36 and yield to a maturity of 7%. the bond carries a coupon rate of 6%, paid semi annually. if you buy the bond today, how many semi- annual coupon payments will you receive until the final maturity?
Please provide complete step by step asnwer: You purchased an annual interest coupon bond one year ago that had six years remaining to maturity at that time. The coupon interest rate was 10%, and the par value was $1,000. At the time you purchased the bond, the yield to maturity was 8%. If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%, your annual total rate of return on holding the bond for that year would have been A) 7.00%. B) 7.82%. C) 8.00%. D) 11.95%. E) None of the options are correct.

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