(a) Two years after the bonds were issued (after the 4th coupon amount payments), the going rate of interest on bonds such as these fell to 8% (compounded semi-annually). At what price would the bonds sell? Sell price = $ (keep 2 decimal places) (b) Suppose that, two years after the bonds' issue (after the 4th coupon amount payments), the going interest rate had risen to 15% (compounded semi-annually). At what price would the bonds sell?

(a) Two years after the bonds were issued (after the 4th coupon amount payments), the going rate of interest on bonds such as these fell to 8% (compounded semi-annually). At what price would the bonds sell? Sell price = $ (keep 2 decimal places) (b) Suppose that, two years after the bonds' issue (after the 4th coupon amount payments), the going interest rate had risen to 15% (compounded semi-annually). At what price would the bonds sell?

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

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Suppose Ford sold an issue of bonds with a 14-year maturity, a $1400 par value, a 10% coupon rate, and semiannual interest payments. Please use the factor formulae to solve the questions below: (a) Two years after the bonds were issued (after the 4thcoupon amount payments), the going rate of interest on bonds such as these fell to 7%. At what price would the bonds sell? Sell price = $ %3D (keep 2 decimal places) (b) Suppose that, two years after the bonds' issue (after the 4thcoupon amount payments), the going interest rate had risen to 14%. At what price would the bonds sell? Sell price = $ (keep 2 decimal places)
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
Suppose Ford sold an issue of bonds with a15-year maturity, a $1,000 par value, a 12% couponrate, and semiannual interest payments.(a) Two years after the bonds were issued, thegoing rate of interest on bonds such as thesefell to 9%. At what price would the bonds sell?(b) Suppose that, two years after the bonds’ issue,the going interest rate had risen to 13%. At whatprice would the bonds sell?(c) Today, the closing price of the bond is $783.58.What is the effective current yield?
You issued debt in the form of bonds, with a face value of $1,000, and have 12 years until maturity. The bonds have an annual coupon rate of 8.4%, which are paid semiannually. a. The current price is $1,115. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) b. The tax rate is 25%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) a. Pretax cost of debt b. Aftertax cost fo debt % %
Suppose Hillard Manufacturing sold an issue of bonds with a 12-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. Suppose that 2 years after the issue date (as in part a) interest rates fell to 5%. Suppose further that the interest rate remained at 6% for the next 10 years. What would happen to the price of the bonds over time?
3) Sari Minerals Co. issued 15-year bonds three years ago with a coupon rate of 5%. These bonds make semiannual payments. If these bonds are currently selling for $950, what is their Yield to Maturity (YTM)
You issued debt in the form of bonds, with a face value of $1,000, and have 9 years until maturity. The bonds have an annual coupon rate of 7.8%, which are paid semiannually. a. The current price is $1,100. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g 12.34.) b. The tax rate is 22%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.)
The Clarence Corporation has issued bonds that pay semiannually with the following characteristics: Macaulay Duration 7.30 years a. Calculate modified duration using the information provided. Do not round intermediate calculations. Round your answer to two decimal places. Use only the data provided in the table above (in the problem statement) for your calculations. years Coupon 12% b. What is a better measure when calculating the bond's sensitivity to changes in interest rates? is a better measure of the bond's sensitivity to changes in interest rates as select- -Select- c. Identify the direction of change in modified duration if: 1. the coupon of the bond were 14%, not 12%. Modified duration -Select- as the coupon increases. 2. the maturity of the bond were 9 years, not 15 years. Modified duration -Select- | as maturity decreases. Yield to Maturity Maturity 12% 15 considers only the final cash flow, while -Select- includes other factors.
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 sell
2. Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
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.
On July 1, Somers Inc. issued $300,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. A. Assuming the bonds sold at 64.55, what was the selling price of the bonds? B. Explain why the cash received from selling this bond is different from the $300,000 face value of the bond. Investors can earn a in other similar bonds so the bond sells at a

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