Malcolm Technology issued a new series of bonds on January 1, 1985. They were sold at par ($1,000) have a coupon rate of 10% and mature in 20 years. Coupon payments are made semi-annually. (1) Interest rates had risen to 12% by 2000. What would the price of the bond be on December 31, 1995?
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Malcolm Technology issued a new series of bonds on January 1, 1985. They were sold at par ($1,000) have a coupon rate of 10% and mature in 20 years. Coupon payments are made semi-annually.
(1) Interest rates had risen to 12% by 2000. What would the price of the bond be on December 31, 1995?
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- In May 2000, the U.S. Treasury issued 30-year bonds with a coupon rate of 6.25%, paid semi-annually. A bond with a face value of $1,000 pays $31.25 (1,000 × 0.0625 / 2) every six months for the next 30 years; in May 2030, the bond also repays the principal amount, $1,000. 1. What is the value of the bond if, immediately after issue in May 2000, the 30-year interest rate increases to 7.5%? 2. What is the value of the bond if, immediately after issue in May 2000, the 30-year interest rate decreases to 5.0%? 3. On a graph in Excel, show how the value of the bond changes as the interest rate changes (plot the value as a function of the interest rate). At what interest rate is the value of the bond equal to its face value of $1,000?The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d.c) The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31, 2008. Coupon payments are made semi-annually (on June 30 and December 31). What was the price of the bond on 25 years later, assuming that the level of interest rates had fallen to 10 percent?
- The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d. My teacher gave me this solution: SOLUTION: PB = PMT [PVFAk,n] + FV [PVFk,n] n = 20 ´ 2 = 40 k = 12/2 = 6 PMT = $1,000 ´ .10/2 = $50 FV = $1,000 PB = $50 [PVFA6,40] + $1,000 [PVF6,40] = $50 (15.046 3) + $1,000 (.0972) = $849.52 Bartleby gave me this answer earlier tonight: particulars periods cash flows ($) PVF @ 6% Present Value ($) coupon payments ($1,000 X 5%) 1 to 50 50.00 15.469974 773.4987164 payment on redemption 50 1000 0.053283 53.283021178 Present…The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. What is the bond's price today if the interest rate on comparable new issues is 12%? What is the price today if the interest rate is 8%? Explain the results of parts a and b in terms of opportunities available to investors. What is the price today if the interest rate is 10%? Comment on the answer to part d. The first three subparts have been answered. Please answer #4 and #5. Should be pretty simple, but I just want to make sure I understand the material.Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually. a. If the going interest rate has risen to 10 percent, at what price would the bonds be selling today? b. Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of Cisco’s bonds over time?
- suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. interest is paid semiannually. a. if the going interest rate has risen to 10 percent, at what price would the bonds be selling today? b. suppose that the interest rate remained at 10 percent for the next 10 years. what would happen to the price of the Cisco Systems bonds over time?Cosmos issued a new series of bonds on January 1, 1995. The bonds were sold at par ($1,000), had a 12% coupon, and mature in 30 years, on December 31, 2024. Coupon payments are made semiannually (on June 30 and December 31). What was the YTM on January 1, 1995?The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31, 2008. Coupon payments are made semi-annually (on June 30 and December 31). What was the YTM of Pennington’s bonds on January 1, 1979? What was the price of the bond on January 1, 1984, 5 years later, if the level of interest rates had fallen to 10 percent? c. On July 1, 2002, Pennington’s bonds sold for $916.42. What was the YTM at that date?
- Suppose you sold an issue of bonds with a 5-year maturity, a $1,000 par value, a 10% coupon rate, and annual interest payments according to the following data. 2. a. one year after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell b. two years after the initial issuance, the going interest rate had risen to 12%. At what price would the bonds sellThe Brownstone Corporation’s bonds have 5 years remaining to maturity.Interest is paid annually, the bonds have a $1,000 par value, and the couponinterest rate is 9%.a. What is the yield to maturity at a current market price of (1) $829 or(2) $1,104?b. Would you pay $829 for one of these bonds if you thought that theappropriate rate of interest was 12%—that is, if rd 5 12%? Explain youranswerThatcher Corporation’s bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8 percent coupon rate, paid semiannually. The price of the bond is $1,100. What is the firm’s cost (percentage rate) of borrowing money under these market conditions?