KYour firm has a credit rating of A. You notice that the credit spread for five-year maturity A debt is 91 basis points(0.91%). Your firm's five-year has semi-annual coupons and a coupon rate of 6%. You see that new five-yearGovernment of Canada bonds are being issued with a YTM of 2%. What should the price of your outstandingfive-year bonds be? Assume a par value of $100.The price of your outstanding five-year bonds should be $(Round to the nearest cent.)

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

Your firm has a credit rating of A. You notice that the credit spread for five-year maturity A debt is (0.91%). Your firm's five-year has semi-annual coupons and a coupon rate of 6%. You see that m Government of Canada bonds are being issued with a YTM of 2%. What should the price of your five-year bonds be? Assume a par value of $100. The price of your outstanding five-year bonds should be S (Round to the nearest cent.)

Your firm has a credit rating of A. You notice that the credit spread for five-year maturity A debt is (0.91%). Your firm's five-year has semi-annual coupons and a coupon rate of 6%. You see that m Government of Canada bonds are being issued with a YTM of 2%. What should the price of your five-year bonds be? Assume a par value of $100. The price of your outstanding five-year bonds should be S (Round to the nearest cent.)

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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Your firm has a credit rating of A. You notice that the credit spread for five-year maturity A debt is 89 basis points (0.89%). Your firm's five-year debt has a coupon rate of 6.2% with semi-annual coupons. You see that new five-year Treasury notes are being issued at par with a coupon rate of 1.8%. What should be the price of your outstanding five-year bonds per $100 face value. The price of the bond is $ (Round to the nearest cent.)
A firm sells bonds with a par value of 1000 Rupees, carry a 8% coupon rate, with a maturity period of 9 years. The bond sells at a yield to maturity of 9%. a) What is the interest payment you should receive each year? b) What is the selling price of the bond?
Sunderland Company is issuing 8 yr bonds with a coupon rate of 5.9% and semiannual coupon pymts. If the current market rate for similar bonds is 8%... What will the bond price be? (Round intermediate calculations to 5 decimal places & the bond price to 2 decimal places.) And if the company management wants to raise $1.25 million, how many bonds does the firm have to sell?
BVA, Inc. has two bond issues outstanding, each with a par value of $1,000. Information about each is listed below. Suppose market interest rates rise 1 percentage point across the yield curve. What will be the change in price for each of the bonds? Does this tell us anything about the relationship between initial yield to maturity and interest rate risk? Bond A: 12 years to maturity, pays a 7 percent coupon, and the market interest rate on this BB-rated bond is 12.36 percent. Bond B: 12 years to maturity, pays a 7 percent coupon, and the market interest rate on this A-rated bond is 10.25 percent. Kindly providethe excel solution
A BBB-rated corporate bond has a yield to maturity of 13.2%. A U.S. Treasury security has a yield to maturity of 11.8%. These yields are quoted as APRS with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 12.7% and have 5 years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds?
A firm has liabilities of $98 in one year, $100 in two years, and $107 in three years. The firm exactly matches its liabilities by purchasing the following zero or annual coupon bonds redeemable at par: Bond Maturity Par Value Coupon Rate Effective Yield A 1 year 100 5% 3% B 2 years 100 0% 4% C 3 years 100 4% 5% Find the number of units of Bond A that must be purchased to match the liabilities exactly. (A) 0.894 (B) 0.897 (C) 0.913 (D) 0.933 (E) 0.959
XYZ pty Ltd is considering investing in one of two outstanding bonds. The bonds offer 11% coupon interest rates and pay annual interest. Bond A has exactly 5 years to maturity and bond B has 15 years to maturity. You are appointed to evaluate the bond. Calculate the value of bond A and B if the required return (YTM) is 9% A. R1077.79 & R1261.21 Respectively B. R1177.79 & R1161.21 Respectively C. R1 077.79 & R1 161.21 Respectively D. R1095 & R1161.21 Respectively
What are the excel formulas and answers to Part A and Part B. Part A: (Left Side) KIMCHI CORPORATION's capital investment bonds have a maturity of 10 years with a face value of $1,000 and a semi-annual 10% coupon. They are callable in 3 years at $1150 and currently sell for $1,290. What is the nominal yield to maturity and the nominal yield to call? What return should investors expect to earn on these bonds. Part B: (Right Side) KIMCHI CORPORATION also has bonds with 5 years left to maturity with an annual coupon of 10%. What would be the yield to maturity at a current market price of $850? What would be the yield to maturity if the current market price would be $1,125? What would be the price of the bond to you if your cost of capital was 12%? What would be the price of the bond to you if your cost of capital was 8%?
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James Cobin Co is a software development company that headquarters in Toronto and covers Canada, the United States, Japan, and Europe. The firm has issued bonds at face value at a yield to maturity at 6% a few years ago. Now with 10 years left until maturity, the yield to maturity has increased to 8%. a. Explain and interpret the change in the yield to maturity. b. What is the current price of the bond? Assume coupons are paid once a year. C Suppose that you purchased this bond today and are considenng selling it a year later. The yield to maturity is expected to be 10% a year later. Isit a good investment? Explain.
The Chief Financial Officer of a company would like to raise money for new equipment by floating a new bond issue. The CFO would like to receive $1000 (full face value) for each of the bonds she sells. After collecting the below bond market data, and if the bonds carry a rating of A and have a term of 10 years, what coupon rate should be included in the bond contract? Assume an annual coupon payment. Security& Rating Maturity Face Coupon Price Treasury 1 $ 1,000 0.00% $ 965.00 Treasury 3 $ 1,000 1.90% $ 939.06 Treasury 5 $ 1,000 4.30% $ 932.42 Treasury 10 $ 1,000 6.80% $ 1,007.12 Treasury 15 $ 1,000 6.60% $ 908.25 CorpA A 5 $ 1,000 8.10% $ 990.00 CorpB BB 10 $ 1,000 7.90% $ 859.88 CorpC AA 15 $ 1,000 7.00% $ 660.00
A company's 5-year bonds are yielding 8% per year. Treasury bonds with the same maturity are yielding 4.2% per year, and the real risk-free rate (r*) is 2.15%. The average inflation premium is 1.65%, and the maturity risk premium is estimated to be 0.1 × (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.4%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.

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