edia Bias Incorporated issued bonds 10 years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual erest payment was then 11 percent. This return was in line with the required returns by bondholders at that point in time as escribed below: Real rate of return. Inflation premium Risk premium Total return 11% assume that 10 years later, due to good publicity, the risk premium is now 3 percent and is appropriately reflected in the required eturn (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond

edia Bias Incorporated issued bonds 10 years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual erest payment was then 11 percent. This return was in line with the required returns by bondholders at that point in time as escribed below: Real rate of return. Inflation premium Risk premium Total return 11% assume that 10 years later, due to good publicity, the risk premium is now 3 percent and is appropriately reflected in the required eturn (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Media Blas Incorporated issued bonds 10 years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual Interest payment was then 10 percent. This return was in line with the required returns by bondholders at that point in time as described below: Real rate of return Inflation premium Risk premium Total return 2% 4 10% Assume that 10 years later, due to good publicity, the risk premium is now 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond Answer is complete but not entirely correct. 972 72
Martin Shipping Lines issued bonds 10 years ago at $1,000 per bond. The bonds had a 30-year life when issued, with semiannual payments at the then annual rate of 13 percent. This return was in line with required returns by bondholders at that point, as described below: Real rate of return Inflation premium Risk premium Total return 3% 4 2 9% Assume that today the inflation premium is only 1 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. Compute the new price of the bond Use Appendix B and Appendix D (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answer to 2 decimal places.) New price of the bond $
Martin Shipping Lines issued bonds 10 years ago at $ 1,000 per bond. The bonds had a 30-year life when issued, with semiannual payments at the then annual rate of 12 percent. This return was in line with required returns by bondholders at that point, as described below: Real rate of return 2% Inflation premium 4 Risk premium 4 Total return 10 % Assume that today the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. Compute the new price of the bond. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.) New price of the bond $
Media Bias Incorporated issued bonds 10 years ago at $1,000 per bond. These bonds had a 40-year life when issued and the annual interest payment was then 11 percent. This return was in line with the required returns by bondholders at that point in time as described below: Real rate of return 2% Inflation premium 4 Risk premium 5 Total return 11% Assume that 10 years later, due to good publicity, the risk premium is now 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 30 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Tom Cruise Lines Incorporated issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 58 6 4 158 Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 25 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond t
Tom Cruise Lines Incorporated issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 5% 14% Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity. New price of the bond Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Check my
13. Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described next: Real rate of return 4% Inflation premium 6 Risk premium 5 Total return 15% Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity. Compute the new price of the bond. 14. A) Find thr present value of 2 percent x 1000 (or $20) for 20 years at 10 percent. The $20 is assumed to be an annual payment. B) Add this value to $1000 C) explain why the answers to problem 14b and problem 13 are basically the same. * Just need help with #14 not #13 thank you
Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 16 percent to 6 percent. o. What is the bond price at 16 percent? Bond price |$ $. 64427 b. What is the bond price at 6 percent? c. What would be your percentage return on investment if you bought when rates were 16 percent and sold when rates were 6 percent? Note: Do not round intermediote colculotions. Input your onswer os o percent rounded to 2 decimel places. Return on irvestment $
The Emory Corporation issued an 8%, 25-year bond 15 years ago. At the time of issue it sold for its par (face) value of $1,000. Comparable bonds are yielding 10% today. What must Emory’s bond sell for in today’s market to yield 10% (YTM) to the buyer? Assume the bond pays interest annually. Also calculate the bond’s current yield. a) Suppose the bond was issued 20 years ago what price must it be sold for today and also calculate the bond’s current yield b) Assume the bond was issued 5 years ago what price must it be sold for today and also calculate the bond’s current yield
Assume that Bunch Inc. has an issue of 18 -year $1,000 par value bonds that pay 7% interest, annually. Further assume that today's required rate of return on these bonds is 5%. How much would these bonds sell for today? Round off to the nearest $1. Select one:$1,201.32$1,233.79$1,032.56$1,134.88
DM Inc.'s outstanding, callable bonds were issued seven years ago, with a coupon rate of 5%, original maturity of 25 years, par value of $1,000, gall price of $1,100 and 10 years of call protection. The bonds are currently selling for $1,200. Interest rates are expected to remain stable in the next few years. Calculate the return that an investor purchasing the bond today should expect to earn.A. 1.43%B. 3.45%C. 3.75% D. 3.84%
Solve by Formula. Three years ago, ABC Company issued 10-year bonds that pay 5% semiannually. a. If the bond currently sells for $1,045, what is the yield to maturity (YTM) on this bond? b. If you are expecting that the interest rate will drop in the near future and you want to gain profit by speculating on a bond, will you buy or sell this bond? Why?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS