A 30-year bond with a face value of $1000 has a coupon rate of 5.5%, with semiannual payments. a. What is the coupon payment for this bond? b. Draw the cash flows for the bond on a timeline.

Question

Want to see more full solutions like this?

Answer 1

Textbook Question

Chapter 6, Problem 1P

A 30-year bond with a face value of $1000 has a coupon rate of 5.5%, with semiannual payments.

a. What is the coupon payment for this bond?
b. Draw the cash flows for the bond on a timeline.

Expert Solution

Summary Introduction

a.

To determine: The coupon payment on a bond.

Introduction:

Yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended until its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond and it likens the current estimation of bond’s future cash flow to its present market cost. Coupon rate is expressed as an interest rate on a fixed income security like a bond. It is also called as the interest rate that the bondholders receive from their investment. It depends on the yield as of the day when the bond is issued.

Answer to Problem 1P

The Coupon Payment on a Bond is $27.50.

Explanation of Solution

Determine the coupon payment on a bond

The bond is paid on semi-annual basis.

Coupon Payment=[(Face Value×Coupon Rate)2]=[($1,000×5.50%)2]=[$552]=$27.50

Therefore, the coupon payment on a bond is $27.50.

b.

Expert Solution

Summary Introduction

To determine: The cash flows of the bond on a timeline.

Explanation of Solution

Cash Flow Timeline:

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book, Chapter 6, Problem 1P

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

How the Synthesizing Qualitative Research Methodology in Case Study Research can be used in case of the collapse of Circuit City? What cause the Circuit City Failed to Adapt to E-commerce? Why DMAIC, a data-driven problem-solving method, and Lean Six Sigma did not save Circuit City?

How was the poor strategic decisions lead to economic downturns of Circuit City Company? What are the sequence of key events and problems that contribute to its collapse. Could you please explain each one them? How Lean Six Sigma businesses can reduce waste, improve efficiency, and enhance customer satisfaction?

Suppose you deposit $9500 into an savings account earning 5% annual interest compounded continuously. To pay for all your music downloads, each year you withdraw $1000 in a continuous way. Let A(t) represent the amount of money in your savings account t years after your initial deposit. (A) Write the DE model for the time rate of change of money in the account. Also state the initial condition. dA dt A(0) (B) Solve the IVP to find the amount of money in the account as a function of time. A(t)= (C) When will your money run out? t = years

Answer 2

Textbook Question

Chapter 6, Problem 1P

A 30-year bond with a face value of $1000 has a coupon rate of 5.5%, with semiannual payments.

a. What is the coupon payment for this bond?
b. Draw the cash flows for the bond on a timeline.

Expert Solution

Summary Introduction

a.

To determine: The coupon payment on a bond.

Introduction:

Yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended until its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond and it likens the current estimation of bond’s future cash flow to its present market cost. Coupon rate is expressed as an interest rate on a fixed income security like a bond. It is also called as the interest rate that the bondholders receive from their investment. It depends on the yield as of the day when the bond is issued.

Answer to Problem 1P

The Coupon Payment on a Bond is $27.50.

Explanation of Solution

Determine the coupon payment on a bond

The bond is paid on semi-annual basis.

Coupon Payment=[(Face Value×Coupon Rate)2]=[($1,000×5.50%)2]=[$552]=$27.50

Therefore, the coupon payment on a bond is $27.50.

b.

Expert Solution

Summary Introduction

To determine: The cash flows of the bond on a timeline.

Explanation of Solution

Cash Flow Timeline:

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book, Chapter 6, Problem 1P

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 6, Problem 1P

A 30-year bond with a face value of $1000 has a coupon rate of 5.5%, with semiannual payments.

a. What is the coupon payment for this bond?
b. Draw the cash flows for the bond on a timeline.

Expert Solution

Summary Introduction

a.

To determine: The coupon payment on a bond.

Introduction:

Yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended until its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond and it likens the current estimation of bond’s future cash flow to its present market cost. Coupon rate is expressed as an interest rate on a fixed income security like a bond. It is also called as the interest rate that the bondholders receive from their investment. It depends on the yield as of the day when the bond is issued.

Answer to Problem 1P

The Coupon Payment on a Bond is $27.50.

Explanation of Solution

Determine the coupon payment on a bond

The bond is paid on semi-annual basis.

Coupon Payment=[(Face Value×Coupon Rate)2]=[($1,000×5.50%)2]=[$552]=$27.50

Therefore, the coupon payment on a bond is $27.50.

b.

Expert Solution

Summary Introduction

To determine: The cash flows of the bond on a timeline.

Explanation of Solution

Cash Flow Timeline:

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book, Chapter 6, Problem 1P

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 6, Problem 1P

A 30-year bond with a face value of $1000 has a coupon rate of 5.5%, with semiannual payments.

a. What is the coupon payment for this bond?
b. Draw the cash flows for the bond on a timeline.

Expert Solution

Summary Introduction

a.

To determine: The coupon payment on a bond.

Introduction:

Yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended until its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond and it likens the current estimation of bond’s future cash flow to its present market cost. Coupon rate is expressed as an interest rate on a fixed income security like a bond. It is also called as the interest rate that the bondholders receive from their investment. It depends on the yield as of the day when the bond is issued.

Answer to Problem 1P

The Coupon Payment on a Bond is $27.50.

Explanation of Solution

Determine the coupon payment on a bond

The bond is paid on semi-annual basis.

Coupon Payment=[(Face Value×Coupon Rate)2]=[($1,000×5.50%)2]=[$552]=$27.50

Therefore, the coupon payment on a bond is $27.50.

b.

Expert Solution

Summary Introduction

To determine: The cash flows of the bond on a timeline.

Explanation of Solution

Cash Flow Timeline:

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book, Chapter 6, Problem 1P

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution

Summary Introduction

a.

To determine: The coupon payment on a bond.

Introduction:

Yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended until its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond and it likens the current estimation of bond’s future cash flow to its present market cost. Coupon rate is expressed as an interest rate on a fixed income security like a bond. It is also called as the interest rate that the bondholders receive from their investment. It depends on the yield as of the day when the bond is issued.

Answer to Problem 1P

The Coupon Payment on a Bond is $27.50.

Explanation of Solution

Determine the coupon payment on a bond

The bond is paid on semi-annual basis.

Coupon Payment=[(Face Value×Coupon Rate)2]=[($1,000×5.50%)2]=[$552]=$27.50

Therefore, the coupon payment on a bond is $27.50.

b.

Expert Solution

Summary Introduction

To determine: The cash flows of the bond on a timeline.

Explanation of Solution

Cash Flow Timeline:

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book, Chapter 6, Problem 1P

Answer 8

Expert Solution

Summary Introduction

a.

To determine: The coupon payment on a bond.

Introduction:

Yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended until its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond and it likens the current estimation of bond’s future cash flow to its present market cost. Coupon rate is expressed as an interest rate on a fixed income security like a bond. It is also called as the interest rate that the bondholders receive from their investment. It depends on the yield as of the day when the bond is issued.

Answer to Problem 1P

The Coupon Payment on a Bond is $27.50.

Explanation of Solution

Determine the coupon payment on a bond

The bond is paid on semi-annual basis.

Coupon Payment=[(Face Value×Coupon Rate)2]=[($1,000×5.50%)2]=[$552]=$27.50

Therefore, the coupon payment on a bond is $27.50.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

a.

To determine: The coupon payment on a bond.

Introduction:

Yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended until its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond and it likens the current estimation of bond’s future cash flow to its present market cost. Coupon rate is expressed as an interest rate on a fixed income security like a bond. It is also called as the interest rate that the bondholders receive from their investment. It depends on the yield as of the day when the bond is issued.