Island Telephone Corporation issued a $240,000 face value bond on March 21, 1989, carrying a 9.25% coupon and 25 years to maturity. Global Financial Services purchased the bond on March 21, 1996, at which point the market rate was 8.25%, and sold it on September 21, 2008, for $307,186.03 when market rates were 4.9%. What yield did Global Financial Services realize on its investment? Number 4

Island Telephone Corporation issued a $240,000 face value bond on March 21, 1989, carrying a 9.25% coupon and 25 years to maturity. Global Financial Services purchased the bond on March 21, 1996, at which point the market rate was 8.25%, and sold it on September 21, 2008, for $307,186.03 when market rates were 4.9%. What yield did Global Financial Services realize on its investment? Number 4

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 19P

See similar textbooks

Similar questions

Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. Two years 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? Suppose that, 2 years after the initial offering, the going interest rate had risen to 12%. At what price would the bonds sell? Suppose, as in part a, that interest rates fell to 6% 2 years after the issue date. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time? Please provide calculation in excel.
To help finance a major expansion, GAMA Company sold a bond with 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. What is the component cost of debt for use in the WACC calculation? Show work in excel and explain answer
A company that manufactures general-purpose transducers invested $2 million four years ago in high-yield junk bonds. If the bonds are now worth $2.8 million, what rate of return per year did the company make on the basis of (a) simple interest, and (b) compound interest?
A company that manufactures general-purpose transducers invested P2 million 4 years ago in high-yield junk bonds. If the bonds are now worth P2.8 million, what rate of return per year did the company make on the basis of simple interest.
Last year, The Harvest Time Corporation sold R 18,000,000 worth of 7.5% coupon,15-year maturity, R 1000 par value, AAA-rated; non-callable bonds to finance its business expansion. Currently, investors are demanding a yield of 8.5% on similar bonds. If you own one of these bonds and want to sell it, how much money can you expect to receive on it?
In December 2002, DoubleDown, Inc. issued $100 million in bonds. These bonds originally had a 20 year maturity, a 9.5% coupon rate, and semi-annual interest payments on a $1,000 Par value. When they originated, the bonds sold at par. Since origination, the required rate of return on DoubleDown bonds has hovered between a low of 6.75% to a high of 11.5% and currently sell at par value. What is the current cost of debt (r,)for DoubleDown?
Suppose Hillard Manufacturing sold an issue of bonds with a 10 year maturing a $1,000 par value a 10% coupon rate, and semiannual interest payments. A) Two years 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) Suppose that 2 years after the initial offering, the going interest rate had risen 12%. At what price would the bonds sell? Suppose that 2 years after the issue date (as in part a ) interest rates fell to 6%. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time?
Occam Industrial Machines issued 145,000 zero coupon bonds six years ago. The bonds have a par value of $1,000 and originally had 30 years to maturity with a yield to maturity of 7 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.1 percent. Assume semiannual compounding for the bonds. What is the dollar price of the bonds? What is the market value of the company's debt? If the company has a $46 million market value of equity, what weight should it use for debt when calculating the cost of capital?
MLK Bank has an asset portfolio that consists of $90 million of 30-year, 9 percent annual coupon, $1,000 bonds that sell at par. a-1. What will be the bonds’ new prices if market yields change immediately by ± 0.10 percent?a-2. What will be the new prices if market yields change immediately by ± 2.00 percent?b-1. The duration of these bonds is 11.1983 years. What are the predicted bond prices in each of the four cases using the duration rule?b-2. What is the amount of error between the duration prediction and the actual market values?
i. Calculate the value of Macaulay’s duration for a 10-year, $1000 par value bond purchased today at a yield to maturity of 14% and a coupon rate of 10%. ii. Given the information in (i), did the bond sell at a discount or premium?iii. One of the most important structural changes affecting the banking community in Ghana is the drive towards consolidation. Discuss three benefits of this move to the Ghanaian economy.(You answer should not exceed 600 words)
Suppose Dillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 face value, a 10% coupon rate, and semiannual interest payments. Two years 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? Suppose that 2-years after the issue date (as in part a) interest rates fell to 6%. Suppose further that the interest rate remained at 6%for the next 8 years. WAnhat would happen to the price of the bonds over time? Explain
Michalleti Marketing Consulting Ltd issued Gh¢500million of zero-coupon bonds with ex-interest of Gh¢120, due for repayment in 5years time at par. Its current market price is Gh¢105. What is the company’s cost of debt capital? plZ help me sir urgently