Algo Co's 17-year bonds currently sell for $1,204 and have a par value of $1,000. The annualcoupon rate is 8.55% and interest payments are made semi-annually. The bonds can be called 7years after issue at a premium of 3.75% over par value. What is their yield to call (YTC), 1 year afterthe initial issue?6.5436%5.1023%4.6183%O 5.4524%6.6507%

To calculate YTC, we need to use an excel function called IRR

Answered: Algo Co's 17-year bonds currently sell…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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AEP has a 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 11 years from now?
Jackson Corporation's bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 11%. The bonds have a yield to maturity of 12%. What is the current market price of these bonds? Do not round intermediate calculations. Round your answer to the nearest cent. $
Culpepper Supply has a bond issue outstanding that pays a 7.5% coupon and matures in 40 years. The market price is $912.90. The coupon payment is paid quarterly. What is the yield to maturity?
Thatcher Corporation's bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1,100. The bonds are callable in 5 years at a call price of $1,050. What's the yield to maturity?
Brooks Inc.'s callable bonds are currently selling for $1,300. They pay a coupon rate of 10% annually, have 10 years to maturity, and a $1,000 par value. The earliest that the bonds can be called is 3 years from now for a call price of $1,200. What is the Yield to Cail?
ABC Inc. is planning to issue new annual coupon bonds with a maturity of ten years. The company outstanding (annual coupon paying) bonds have a 7.5% coupon rate and mature in ten years. They are currently selling for $1,013.03. What would the coupon rate on the new bonds have to be such that they will sell at par upon issuance?
Taussig Corp.'s bonds currently sell for $1,220. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,050. What rate of return should an investor expect to earn if he or she purchases these bonds?
Madsen Motors's bonds have 15 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 7%, and the yield to maturity is 10%. What is the bond's current market price? Round your answer to the nearest cent. $
Silver Run Inc. has 6% coupon bonds outstanding that pay interest semiannually and have 15 years remaining until maturity. They carry a face value of $1000. These bonds are currently selling for $1143. What price should these bonds sell for two years from now if their yield drops by 100 basis points over the two years?
Bernard co. has 8% coupon bonds on the market that have 17 years left to maturity. The bonds will make annual payments. If the YTM on these bonds is 9%, what is the current bond price (in $ dollars)? (Assume the face value of the bond is $1,000)
Arnot International's bonds have a current market price of $1,200. The bonds have a 12% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? Round your answer to two decimal places. % What is the yield to call if they are called in 5 years? Round your answer to two decimal places. % Which yield might investors expect to earn on these bonds, and why? I. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.II. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.III. Investors would expect the bonds to be called and to earn the YTC because the YTM is less than the YTC.IV. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. The bond's indenture indicates that the call provision gives…
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