Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 6.11P
Subpart (a)
Summary Introduction
To calculate: Dollar price of the bond.
Introduction:
Subpart (b)
Summary Introduction
To calculate: Total interest expense.
Introduction:
Current yield of bond: Current yield of bond is the annual interest payment divided by the current price of bond.
Subpart (c)
Summary Introduction
To discuss: Is the bond sells at par, at discount or at premium.
Subpart (d)
Summary Introduction
To discuss: Comparison of bond current yield and YTM.
Introduction:
Yield to maturity (YTM): The
Current yield of bond: Current yield of bond is the annual interest payment divided by the current price of bond.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume that the Financial Management Corporation's $1,000-par valuebond has a 7.200% coupon, matures on May 15, 2027, has a current price quote of 93.748 and a yield to maturity (YTM) of 8.588%.Given this information, answer the following questions:
a. What was the dollar price of the bond?
b. What is the bond's current yield?
c. Is the bond selling at par, at a discount, or at a premium? Why?
d. Compare the bond's current yield calculated in part b to its YTM and explain why they differ.
Bond prices and yields Assume that the Financial Management Corporation's $1,000-par-value bond has a 7.100% coupon, matures on May 15, 2027, has a current price quote of 94.727 and a
yield to maturity (YTM) of 8.005 %. Given this information, answer the following questions:
a. What was the dollar price of the bond?
b. What is the bond's current yield?
c. Is the bond selling at par, at a discount, or at a premium? Why?
d. Compare the bond's current yield calculated in part b to its YTM and explain why they differ
a. The dollar price of the bond is $(Round to the nearest cent.)
Assume that the financial anagement corporation'shas 1000 par value bond had a 5.70% coupon, matures on May 15,2020, has a current price quote of 97.708 and has yield to maturity (YTM) of 6.034%. Answer the following question:1. What was the dollar price of bond?2. What is the bond's current yield?3. Is the bond selling at par, at discount or at a premium?4. Compare the bond's current yield calculated in part B to its YTM and explain why its differ. using excel
Chapter 6 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 6.1 - What is the real rate of interest? Differentiate...Ch. 6.1 - What is the term structure of interest rates, and...Ch. 6.1 - For a given class of similar-risk securities, what...Ch. 6.1 - Prob. 6.4RQCh. 6.1 - List and briefly describe the potential issuer-...Ch. 6.2 - What are typical maturities, denominations, and...Ch. 6.2 - Differentiate between standard debt provisions and...Ch. 6.2 - How is the cost of bond financing typically...Ch. 6.2 - Prob. 6.9RQCh. 6.2 - Prob. 6.10RQ
Ch. 6.2 - Compare the basic characteristics of Eurobonds and...Ch. 6.3 - Why is it important for financial managers to...Ch. 6.3 - Prob. 6.13RQCh. 6.3 - Prob. 6.14RQCh. 6.3 - Prob. 6.15RQCh. 6.4 - Prob. 6.16RQCh. 6.4 - What relationship between the required return and...Ch. 6.4 - If the required return on a bond differs from its...Ch. 6.4 - As a risk-averse investor, would you prefer bonds...Ch. 6.4 - What is a bonds yield to maturity (YTM)? Briefly...Ch. 6 - Learning Goals 5, 6 ST6- 1 Bond valuation Lahey...Ch. 6 - Learning Goal 1 E6-1 The nominal, risk-free rate...Ch. 6 - The yields for Treasuries with differing...Ch. 6 - The YTMs for Treasuries with differing maturities...Ch. 6 - Assume that the rate of inflation expected over...Ch. 6 - Calculate the risk premium for each of the...Ch. 6 - You have two assets and must calculate their...Ch. 6 - Prob. 6.7WUECh. 6 - Assume a 5-year Treasury bond has a coupon rate of...Ch. 6 - Interest rate fundamentals: The real rate of...Ch. 6 - Prob. 6.2PCh. 6 - Prob. 6.3PCh. 6 - Yield curve A firm wishing to evaluate interest...Ch. 6 - Term structure of interest rates The following...Ch. 6 - Bond interest payments before and after taxes...Ch. 6 - Prob. 6.11PCh. 6 - Prob. 6.13PCh. 6 - Prob. 6.14PCh. 6 - Bond valuation: Annual interest Calculate the...Ch. 6 - Prob. 6.20PCh. 6 - Bond valuation: Semiannual interest Find the value...
Knowledge Booster
Similar questions
- Assume that the financial anagement corporation's has 1000 par value bond had a 5.70% coupon, matures on May 15,2020, has a current price quote of 97.708 and has yield to maturity (YTM) of 6.034%. Answer the following question: 1. What was the dollar price of bond? 2. What is the bond's current yield? 3. Is the bond selling at par, at discount or at a premium?arrow_forwardUse the following table to find the bond value: a. Price the bonds from the above table with annual coupon payments. b. Price the bonds from the above table with semiannual coupon payments.arrow_forwardThe following table summarizes prices of various default-free zero-coupon bonds ( $100 face value): Maturity (years) 1 2 3 4 5 {:[" Price (per "$100],[" face value) "]:} $96.33 $91.98 $87.41 $82.53 $77.41 a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward-sloping, downward-sloping, or flat? Note: Assume annual compounding. a. Compute the yield to maturity for each bond. The yield on the 1-year bond is %. (Round to two decimal places.) The yield on the 2-year bond is %. (Round to two decimal places.) The yield on the 3-year bond is %. (Round to two decimal places.) The yield on the 4-year bond is enter your response here%. (Round to two decimal places.) Part 5 The yield on the 5-year bond is enter your response here%. (Round to two decimal places.) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will…arrow_forward
- Suppose the following bond quote for IOU Corporation appears in the financial page of today's newspaper. Assume the bond has a face value of $2,000, and the current date is April 19, 2022. Company (Ticker) IOU (IOU) Coupon Maturity 7.50 April 19, 2040 a. Yield to maturity b. Current yield a. What is the yield to maturity of the bond? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the current yield? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Estimated Last Price Last Yield Volume (000) 92.962 ?? 99 % %arrow_forwardThe return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all divided by the beginning bond price. a. What is the holding period return on a bond with a par value of $1,000 and a coupon rate of 7.5 percent if its price at the beginning of the year was $1,070 and its price at the end was $960? Assume interest is paid annually. Note: Negative value should be indicated by parenthesis. Round your answer to 2 decimal places. Holding period return %arrow_forwardPlease see attached. Definitions: Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity.arrow_forward
- The following information is regarding outstanding bonds issued by Midas Corp. Coupon (%) Maturity Yield to Maturity (%) Fitch Ratings 6.75 2029 3.85 4.95 2044 4.32 a. Discuss the relation among the coupon rate, price, and yield for the bond maturing in 2029. Price 130.50 115.75 A Aarrow_forwardA bond for the Chelle Corporation has the following characteristics: Maturity - 12 years Coupon - 12% Yield to maturity - 11.50% Macaulay duration - 6.73 years Convexity - 59.30 Noncallable Assume bond pays interest semiannually. Use only the data provided in the table above (in the problem statement) for your calculations. a. Calculate the approximate price change for this bond using only its duration, assuming its yield to maturity increased by 100 basis points. Do not round intermediate calculations. Round your answer to two decimal places. Use a minus sign to enter negative value, if any. Percentage change in price: % When you are dealing with large yield changes to calculate more precise bond price change -Select- v on price change. b. Calculate the approximate price change for this bond, using only duration, if its yield to maturity declined by 200 basis points. Do not round intermediate calculations. Round your answer to two decimal places. Use a minus sign to enter negative…arrow_forwardWhich of the following is the correct ranking for the bond price? Bond Coupon Rate Maturity (years) YTM A 6% 8 6.5% B 6% 8 7% C 7% 7 6.5% A > B > C B > C > A C > A > Barrow_forward
- The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of the face value): a. Compute the yield to maturity for each bond. b. Plot the zero-coupon yield curve (for the first five years). c. Is the yield curve upward sloping, downward sloping, or flat? a. Compute the yield to maturity for each bond. The yield on the 1-year bond is 3.92 %. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) Price (per $100 face value) 1 $95.51 2 3 $91.10 $86.55 $81.69 $76.45 Print Dondayarrow_forwardWhich of the following is the correct ranking for the bond price? Bond YTM Maturity (years) Coupon rate A 6% 6 5% B 6% 6 5.5% C 5% 6 5.5% A<B<C B<A<C C<B<Aarrow_forwardSuppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper. Assume the bond has a face value of $2,000 and the current date is April 19, 2018. Company (Ticker) Coupon Maturity Last Price Last Yield EST Vol (000s) IOU (IOU) 6.3 Apr 19, 2034 112.97 ?? 1,857 a. What is the yield to maturity of the bond?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning