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.

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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

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Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

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

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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

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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

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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.