a) Determine the market price of the bonds at issue based on an appropriate model. b) Based on the yield-to-maturity today, assess whether the price has changed and proceed to determine its market price today. c) Compare the results in (a) and (b) above and interpret the sensitivity of bond prices to maturity and yield to maturity
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Two years ago, Malayawata Steel issued RM 100 million worth of ten-year bonds with a face value of RM1,000.00 and a coupon rate of 5%. Coupon payments are made semi-annually.
Two years ago, the market yield-to-maturity was 3% p.a.
Due to the increased insecurity facing the industry, the market yield to maturity is now 7% p.a.
a) Determine the market price of the bonds at issue based on an appropriate model.
b) Based on the yield-to-maturity today, assess whether the price has changed and proceed to determine its market price today.
c) Compare the results in (a) and (b) above and interpret the sensitivity of
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- Two years ago, Company XYZ issued $100 million worth of ten-year bonds with a face value of $1,000 and a coupon rate of 5%. Coupon payments are made semi-annually. Two years ago, the market yield-to-maturity was 3% p.a. Due to the increased insecurity facing the industry, the market yield to maturity is now 7% p.a. a) Determine the market price of the bonds at issue based on an appropriate model. b) Based on the yield-to-maturity today, assess whether the price has changed and proceed to determine its market price today. c) Compare the results in (a) and (b) above and interpret the sensitivity of bond prices to maturity and yield to maturity.AAA company plans to issue bonds to expand operations. The bonds will have a par value of $1,000, a 10-year maturity, and a coupon interest rate of 9%, paid semiannually. Current market conditions are such that the bonds will be sold to net $937.79. What is the yield-to-maturity of these bonds?A Multi-national Corporation sold an issue of bonds in the Pakistani bondsmarket. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, thegoing rate of interest on bondssuch as these fell to6% per annum. At what price would the bonds sell inthe market? 2) Suppose that, two yearsafter the initial offering, the going interest ratehad risen to 12%. At what price would the bonds sell?3) Comment on your resultsNote: In both cases you need to calculate market price/bond.
- A Multi-national Corporation sold an issue of bonds in the Pakistani bondsmarket. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6% per annum. At what price would the bonds sell in the market? 2) Suppose that, two years after the initial offering, the going interest ratehad risen to 12%. At what price would the bonds sell?3) Comment on your results in Part-1 and Part-2.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?Charlton Wineries (CW) has outstanding 10-year, €1,000 face value bonds with a 6% coupon rate (semi-annual payments). The bonds are callable in five years and thereafter at par value (on a coupon date). The bonds were issued one year ago and currently sell for €1,050. What is the yield to maturity of the bonds? What is the yield to call? What is the yield to worst?
- Given below is information about three RM $5000 par value bonds, each of which pays coupon semiannually. The required rate of return on each bond is 12%. Calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value……. Bond Coupon Rate (%) Maturity (years) 1 10 5 2 12 10 3 14 15 Using the above table, if the company decided to pay coupon annually (12%), calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value Explain the of Bonds available in the market for the Companies to raise fund……Is there any difference in the value of semiannually and annually……Wildhorse, Inc., has four-year bonds outstanding that pay a coupon rate of 6.4 percent and make coupon payments semiannually. If these bonds are currently selling at $914.89. What is the yield to maturity that an investor can expect to earn on these bonds? Assume face value is $1,000. (Round answer to 1 decimal place, e.g. 15.2 %.) Yield to maturity % What is the effective annual yield? (Round answer to 1 decimal place, e.g. 15.2 %.) Effective annual yield %One year ago, an annual coupon bond was issued by Company X with maturity period of 10 years at coupon rate of 8%. Face value of the bond is $1,000. The interest rate of similar kind of bonds in the market is 9.00%. What is the current price of the bond? a) $935.82 b) $1,000 c) $940.05 d) $949.67
- Sandhill Company is issuing eight-year bonds with a coupon rate of 6.8 percent and semiannual coupon payments. If the current market rate for similar bonds is 10 percent. Assume face value is $1,000. What will the bond price be? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and bond price to 2 decimal places, e.g. 15.25.) Bond price $ If company management wants to raise $1.25 million, how many bonds does the firm have to sell? (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and number of bonds to O decimal places, e.g. 5,275.) Number of bondsA firm issues a $10 million bond with a 7% coupon rate, 4 year maturity, and annual interest payments when market interest rates are 6%. If the market rate changes to 8% and the bonds are carried at amortized cost, the book value of the bonds at the end of the first year will be: $10,262,432 $9,742,290 $10,267,301Suppose a firm is issuing 10,000 bonds. Each bond has a face amount of $950, a stated rate of 7.5%, and an 18-year term. When the bonds are issued, the market rate for similar bonds is 6.8%. What is the coupon (interest) payment of this bond? Based on the coupon (interest) payment found in (1.), what is the bond price when issued given the market rate of 6.8%? Based on your answer to (2.), explain why investors are either willing to pay more or less than the face amount of $950? How much capital does the firm raise assuming all 10,000 bonds are sold at the bond price you found in (2.)? Suppose after 8 years an investor decides to sell their bond for $925. What is the yield to maturity after 8 years given the bond price of $925? Based on the yield to maturity you calculated in (5.), is the bond at par, a premium bond, or a discount bond? Why? What is the bond price after the 8th year if the yield to maturity is 7.5%?