Fundamentals of Financial Management
15th Edition
ISBN: 9780357307724
Author: Brigham
Publisher: CENGAGE L
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Question
Chapter 7, Problem 1P
Summary Introduction
To identify: Current market price of the bond.
Bond valuation refers to the evaluation of bonds value at any point of time which can be used for decision making. Valuation of bond is done for comparison and analysis.
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(Bond valuation) A bond that matures in 15years has a $1,000 par value. The annual coupon interest rate is 13 percent and the market's required yield to maturity on a comparable-risk bond is 14 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?
The value of this bond if it paid interest semiannually would be $________(Round to the nearest cent.)
(Yield to maturity) A bond's market price is
$1,175.
It has a
$1,000
par value, will mature in
8
years, and has a coupon interest rate of
11
percent annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in
16
years? What if it matures in
4
years?
Question content area bottom
Part 1
a. The bond's yield to maturity if it matures in
8
years is
enter your response here%.
(Round to two decimal places.)
Bond prices and maturity dates. Moore Company is about to issue a bond with annual coupon payments, an annual coupon rate of 5%, and a par value of $1,000. The yield to maturity for this bond is 6%.
a. What is the price of the bond if it matures in 5, 10, 15, or 20 years?
b. What do you notice about the price of the bond in relationship
the maturity of the bond?
a. What is the price of the bond if it matures in 5 years?
$(Round to the nearest cent.)
What is the price of the bond if it matures in 10 years?
$(Round to the nearest cent.)
What is the price of the bond if it matures in 15 years?
$(Round to the nearest cent.)
What is the price of the bond if it matures in 20 years?
$ (Round to the nearest cent.)
b. What do you notice about the price of the bond in relationship the maturity of the bond? (Select the best response.)
O A. As the time to maturity increases, the price of the bond increases.
Chapter 7 Solutions
Fundamentals of Financial Management
Ch. 7 - A sinking fund can be set up in one of two ways:...Ch. 7 - Can the following equation be used to find the...Ch. 7 - The values of outstanding bonds change whenever...Ch. 7 - If interest rates rise after a bond issue, what...Ch. 7 - Discuss the following statement: A bonds yield to...Ch. 7 - If you buy a callable bond and interest rates...Ch. 7 - Prob. 7QCh. 7 - Indicate whether each of the following actions...Ch. 7 - Why is a call provision advantageous to a bond...Ch. 7 - Are securities that provide for a sinking fund...
Ch. 7 - Whats the difference between a call for sinking...Ch. 7 - Why are convertibles and bonds with warrants...Ch. 7 - Explain whether the following statement is true or...Ch. 7 - Prob. 14QCh. 7 - A bonds expected return is sometimes estimated by...Ch. 7 - Which of the following bonds has the most price...Ch. 7 - Which of the bonds has the most reinvestment risk?...Ch. 7 - Prob. 1PCh. 7 - YIELD TO MATURITY AND FUTURE PRICE A bond has a...Ch. 7 - Prob. 3PCh. 7 - YIELD TO MATURITY A firms bonds have a maturity of...Ch. 7 - BOND VALUATION An investor has two bonds in his...Ch. 7 - BOND VALUATION An investor has two bonds in her...Ch. 7 - INTEREST RATE SENSITIVITY .An investor purchased...Ch. 7 - YIELD TO CALL Seven years ago the Templeton...Ch. 7 - YIELD TO MATURITY Harrimon Industries bonds have 6...Ch. 7 - Prob. 10PCh. 7 - BOND YIELDS Last year Carson Industries issued a...Ch. 7 - YIELD TO CALL It is now January 1, 2018, and you...Ch. 7 - PRICE AND YIELD A 7% semiannual coupon bond...Ch. 7 - EXPECTED INTEREST RATE Lourdes Corporations 12%...Ch. 7 - BOND VALUATION Bond X is noncallable and has 20...Ch. 7 - Prob. 16PCh. 7 - BOND RETURNS Last year Janet purchased a 1,000...Ch. 7 - YIELD TO MATURITY AND YIELD TO CALL Kempton...Ch. 7 - BOND VALUATION Clifford Clark is a recent retiree...Ch. 7 - BOND VALUATION Robert Black and Carol Alvarez are...
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