7. Imperial Oil decides to raise $500 million by issuing 7-year semi-annual bonds that pay interest of 3.5% per year. If the face value is $1,000 and the current yield is 4%, what is the market price of the bond? A. $924.15 B. $969.73 C. $987.13 D. $992.35 E. $1,032.76

7. Imperial Oil decides to raise $500 million by issuing 7-year semi-annual bonds that pay interest of 3.5% per year. If the face value is $1,000 and the current yield is 4%, what is the market price of the bond? A. $924.15 B. $969.73 C. $987.13 D. $992.35 E. $1,032.76

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

Related questions

Q: 11. An asset is expected to generate a free cash flow of $10,000 per year for five years. If the…

A: Formula: P= C×1-1+r-nr where, P is Present value of Annuity C…

Q: Absalom Energy's 11% coupon rate, semiannual payment, $1,000 par value bonds that mature in 20 years…

A: Yield to call (YTC) is a measure used to estimate the yield an investor would receive if a bond is…

Q: Florida International Bank (FIB) purchased a corporate bond with a coupon rate of 5.5% and a face…

A: The holding period yield (HPY) of a bond is the total return earned by an investor by holding the…

Q: A firm issues five-year bonds with a coupon rate of 6.1%, paid semiannually. The credit spread for…

A: Par value (FV) = $100 Coupon rate = 6.1% Semi annual coupon amount (C) = 100*0.061/2 = $3.05 Years…

Q: 7A-9. U.S. Delay Corporation, a subsidiary of the Postal Service, must decide whether to issue zero…

A: The right answer is a $274.50

Q: Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with four years to maturity…

A: A treasury note is a kind of debt security issued by the government and private companies to the…

Q: Here are data on $1,000 par value bonds issued by Caterpillar and Intel. Assume you are thinking…

A: Bonds with coupons are financial instruments that periodically pay the bondholder interest until the…

Q: Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a…

A: Bond value is the present value of all coupon payments and par value.The following points should be…

Q: Ninja Company's bonds mature in 10 years, have a par value of $1,000, and make an annual coupon…

A: Par value of the bond is $1,000. Maturity is 10 years. Annual coupon payment is $70. Required…

Q: Determining Bond Premium or Discount Smith and Sons, Inc., decides to sell $1,000,000 in bonds to…

A: if coupon rate > market rate:sell at premiumcoupon rate < market rate: sell at discountcoupon…

Q: A $350,000 face value bond having a bond rate of 7% nominal payable semi-annually is purchased for…

A: The selling price of the bond should be such that it earns the required rate of return over the bond…

Q: Marin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon…

A: Time = t = 8 years Face value = fv = $1000 Coupon payment = c = $65 Interest rate = r = 6%

Q: Nancy Jackson is planning to buy 10-year zero coupon bonds issued by the U.S. Treasury. If these…

A: As the name indicates zero coupon bonds do not pay periodic coupons.Instead they are issued at a…

Q: 2. A firm's bonds have a maturity of 10 years with a $1,000 face value, have a 6% semiannual coupon,…

A: Introduction: Yield to call (YTC) is a financial term that refers to the yield a bondholder would…

Q: A $10000 15-year bond is priced to yield at 12% compounded quarterly. It has quarterly coupons of…

A: Face Value = $10,000 Time Period = 15 Years Yield = 12% compounded quarterly

Q: A firm issues two-year bonds with a coupon rate of 6.4%, paid semiannually. The credit spread for…

A: Bonds refer to instruments that are issued by companies to raise debt capital from non-traditional…

Q: A $1,000, 5%, 20-year annual pay-bond has a yield of 6.5%. If the yield remains unchanged, how much…

A: Using Excel PV function to calculate price of the bond

Q: You invest in a three year bond with a face value of $100, a yield of 4% pa and a fixed coupon rate…

A: In Bond Investor received a Fixed Income. Bond yield is the amount of return an investor realizes on…

Q: pm.3 The Coke Company's semi - annual coupon bonds mature in 10 years, have a par value of Sl, 000…

A: The objective of the question is to calculate the price of the bond in one year if the Yield to…

Q: 1. A 6-month Treasury bill with redemption amount of 10,000 is purchased to yield an annual…

A: T-Bills and bonds provide fixed income to the investors for the particular period and face value…

Q: One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 5.3% annual coupon bonds at their…

A: From the question, we can identify the following values:Coupon rate = 5.3%Par value = $1,000Years to…

Q: yield that Brian would earn by selling the bonds today? (Round answer to 2 dec !places, e.g. 15.25%)…

A: In simple words, yield is the rate of return that an investor earns in the form of interest or…

Q: ) What is the price of the bond if it were not callable? b) What is the price of the callable bond?…

A: Callable bond is the bond which can be redeemed by the firm before maturity. The cost of raising a…

Q: You are offered to buy a 4-year coupon corporate bond in the beginning of its 7th month on its third…

A: Because you have posted multiple questions we will answer only the first question and for the…

Q: (Bond valuation) Enterprise, Inc. bonds have an annual coupon rate of 15 percent. The interest is…

A: Bond price is the sum of discounted cash flows arising from the bond. This includes the coupon…

Q: Q3. A company issues a $ 20,000 bond at a coupon rate of 7.5% payable semi-annually. Joan purchased…

A: When the yield to maturity changes the price of the bond changes in the opposite direction.

Q: The company you work for is offering bonds that have a face value of $1,000 and a life of 10 years.…

A: Effective annual interest rate Effective annual interest rate defines the real return on investments…

Q: A 15-year, 6 percent coupon bond pays interest annually. The bond has a face value of $1,000. What…

A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…

Q: a) Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have…

A: Current yield is the coupon payment which is to be paid for the market price of a bond. It is…

Q: A corporation issues a 20 year bond with the final redemption value equal to the face value of…

A: The possible least value of return rate that an investor can earn based on the assumption that the…

Q: Rating YTM 10.0 pany plans to sue live-year bon nual payments). The following table summarizes the…

A: Price of bond depends on yield to maturity and can be found present value of coupon payments and…

Q: Lennar Corporation's one-year bond has a yield equal to 6.6%. Suppose that the maturity risk premium…

A: Given the following: One-year bond yield = 6.6% Maturity risk premium = (t-1)*0.15% The maturity…

Q: Jackson Corporation’s bonds have 12 years remaining o maturity. Interes tis paid annually the bonds…

A: The total return expected on a bond or other fixed-interest investment kept until it matures is…

Q: K (Bond valuation) Enterprise, Inc. bonds have an annual coupon rate of 15 percent. The interest is…

A: Part (a) Given information, Annual coupon rate (C) = 15% or 0.15Coupon payment frequency =…

Q: You own government bonds with a face value of $2 million. The bonds mature 6 years and 3 months from…

A: The Current Value of the bond/Worth of a bond is Computed as the value of cash flows from a bond (in…

Q: 1. S&L Inc., has 8 percent coupon bonds in the market that have 7 years to maturity. The bonds make…

A: Bond valuation is the process of determining the fair value or intrinsic worth of a bond. It…

Q: es Suppose your company needs to raise $69 million and you want to issue 30-year bonds for this…

A: A bond is a fixed-income investment that represents a loan made by an investor to a borrower,…

Q: a) Bonds of TLM Corporation with a par value of R1000 sell for R960, mature in five years, and have…

A: “Since you have asked multiple questions, we will solve the one question for you. If you want any…

Q: 1. Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a…

A: Given Data: Par Value1000Call Price1175One year interest9%probability of 10%60%probability of 8%40%

Q: Blake Company has a P30 million, 12 percent bond issue outstanding with 20 years remaining. The call…

A: A bond indicates a debt instrument that helps the issuer entity to raise funds. It obliges the…

Q: Suppose NCKU company currently has NTD 10 million of five-year bonds with a coupon rate of 2%, a…

A: The modified duration of a bond portfolio refers to the sensitivity of the price of the bond…

Q: Q2. Fast and loose company has outstanding an 8%, four years, $1000-par value bond on which interest…

A: Using Excel PV function to calculate price of the bond

Question

7. Imperial Oil decides to raise $500 million by issuing 7-year semi-annual bonds that pay
interest of 3.5% per year. If the face value is $1,000 and the current yield is 4%, what is the
market price of the bond?
A. $924.15
B. $969.73
C. $987.13
D. $992.35
E. $1,032.76

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Question 2: If Jackson’s food’s bond has 6 years remaining to maturity. Interest is paid annually, bond has a par value of $1000 and the coupon interest rate is 8%, and the market interest rate of 9%. Calculate the bond’s price? If Jackson’s food’s bonds have 20 years remaining to maturity. Interest is paid annually, the bonds have a $ 1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. Calculate the yield to maturity? Differentiate between the discount bond and the premium bond
Q3. A company issues a $ 20,000 bond at a coupon rate of 7.5% payable semi-annually. Joan purchased this bond 10 years before maturity when the yield was 7% compounded semi-annually and sold it two years later when the bond's market yield was 8% compounded semi-annually. Calculate the gain or loss on this investment.
i need the answer quickly
Suppose a state of Iowa zero coupon bond will pay $1000 at par ten years from now with no annual payments over the 10 year period. if the going interest rate on these 10 year bonds is 4.9% how much is the bond worth today a) 669.37 b) 464.84 c) 619.79 d) 650.78 e) 625.99
Pa.2
6
9. Messenger, Inc. bonds have a 4% coupon rate with semiannual coupon payments and a $1,000 par value. The bonds have 11 years until maturity, and sell for $925. What is the current yield for Messenger's bonds? A. 2.16% B. 3.45% C. 4.32% D. 5.52%
Eastern Bank Limited (EBL) has issued a12% Semi-annual Corporate Bond of Tk. 1000 for 8 years. The YTM is 10%. Required: i. Market Price of Bond. ii. One year from now, investors has realized the bond when YTM has decreased to 8% and the reinvestment rate is 10%. What would be the realized compound yield?
F3
a. b. C. Problem 9.4: R & J, Inc. issues a 10-year $1,000 bond that pays $28.50 semi-annually. The market price for the bond is $975. The market's required yield to maturity on a comparable-risk bond is 6 percent. a. What is the value of the bond to you?. b. What happens to the value if the market's yield to maturity on a comparable-risk bond (i) increases to 8 percent or (ii) decreases to 4 percent? c. Under which of the circumstances in parts a & b should you purchase the bond? Years Par (FV) PMT Nper m Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV) Comparable risk (Rate) Bond value (PV)
a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.
p. A company is offering a 8.4% bond with a current price of $765.40, the yield to maturity equals 8.55%, and the bond has a face value of $1,000. If coupon is paid twice a year, how many years are between now and the maturity of this bond? q. The YTM on a taxable bond is 7% and the YTM of a comparable municipal bond is 4%. Calculate the tax rate that will make investors indifferent between investing in either of the two bonds. r. Samantha's Cleaning Company stock currently costs $42.50 per share, considering a required rate of return of 9.5%. Project the next annual dividend, considering you know that the dividend growth rate is 5% indefinitely.

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