You invest in a 55 month $5,163 zero-coupon corporate bond at a simple discount rate of 9.73 per year. Determine the price of the bond and the true interest rate on the bond. a. The price of the bond is $ (Round to 2 decimal places) b. The true interest rate of the bond is x (Round to 4 decimal places X.XXXK) Question Help: Written Example

You invest in a 55 month $5,163 zero-coupon corporate bond at a simple discount rate of 9.73 per year. Determine the price of the bond and the true interest rate on the bond. a. The price of the bond is $ (Round to 2 decimal places) b. The true interest rate of the bond is x (Round to 4 decimal places X.XXXK) Question Help: Written Example

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter5: Bonds, Bond Valuation, And Interest Rates

Section: Chapter Questions

Problem 24SP

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Q1 A corporate bond that you own at the beginning of the year is worth $975. During the year, it pays $35 in interest payments and ends the year valued at $965.What was your dollar return and percent return? (Round "Percent return" answer to 2 decimal places.) DOLLAR RETURN PERCENT RETURN. %
Acme Chemical, Inc. is a major manufacturer of chemical products for the agricultural ndustry, including pesticides, herbicides and other compounds. Due to a number of law suits elated to toxic wastes, Acme Chemical has recently experienced a market re-evaluation of its common stock. The firm also has a bond issue outstanding with 10 years to maturity and an annual coupon rate of 5 percent, with interest paid semi annually. The required nominal market annual interest rate on this bond has now risen to 10 percent due to the high risk level associated vith this firm. The bonds have a par or face value of $1,000. 1. Label each of the variables that you would use to determine the value of this bond in the market today: N (time periods until maturity) PMT (periodic interest payment) I per (periodic market interest rate) EV (future value to be received when the bond matures) = 2. Based on the variables that you have identified in Question #1, what is the market value. today (the present…
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