CFIN
CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
Question
Book Icon
Chapter 6, Problem 4PROB
Summary Introduction

The bond has a face value of $1,000 with a coupon rate of 4.5% paid semi-annually. Also, the bond will mature in next 10 years with a required return of 6%.

Bond’s are issued to raise funds for the company. The important characteristic of a bond is that it has a maturity value which is the value the bondholders will get at the end of the maturity period. Also, some bonds carry coupon rate which means the bondholders will get a regular interest cash flow on that bond.

The yield to maturity (YTM) of the bond is the required rate of return investors expect on holding the bond till the maturity period.

Bond Price is calculated as

Bond Price(Vd) = INTN(1+rd)N+M(1+rd)Nor,Vd=INT(11(1+rd)Nrd)+M(1(1+rd)N)

Where,

INT = coupon payments made

N = number of periods

M = Maturity or Face value

rd = rate of return

Vd = Value of the bond

Blurred answer
Students have asked these similar questions
no ai   do not answer this question if data is not clear or image is blurr. but do not amswer with unclear values. i will give unhelpful.
Estefan Industies has a new project available that requires an initial investment of sex million. The project will provide unlevered cash flows of $925,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of 35. The company's bonds have a YTM of 5.9 percent. The companies with operations comparable to this project have unlevered betas of 1.09, 1.17, 1.28, and 1.20. The risk-free rate is 3.6 percent, and the market risk premium is 7 percent. The tax rate is 21 percent. What is the NPV of this project?
no ai   do not answer this question if data is not clear or image is blurr. please comment i will write values . but do not amswer with unclear values. i will give unhelpful.
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Text book image
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning