Company issued 25 years bonds with a face value of $1,000 with a coupon rate of 8% compounded semi-annually. This bond is callable after 15 years at $1,080 of face value and ct yield to maturity is 7%. What is the value of callable bond?

Company issued 25 years bonds with a face value of $1,000 with a coupon rate of 8% compounded semi-annually. This bond is callable after 15 years at $1,080 of face value and ct yield to maturity is 7%. What is the value of callable bond?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 7PROB

See similar textbooks

Related questions

Q: A Company has issued 55-year bond 17 years ago at a coupon rate of 12% quarterly basis. The face…

A: Bonds are debts instruments that are issued by entities to raise funds and meet their capital…

Q: mji corporation bonds mature in 6 years and have a yield to maturity rate of 8.5%. the par value of…

A: Bonds are the financial instruments that are issued by the financial institutions such as banks,…

Q: ACT has an outstanding bond with a face value ( principal) of 1,000which would mature in 10 years.…

A: Current market value = present value of all future cash flows Here FV = 1000; nper (or time…

Q: A company issues a ten-year $1,000 face value bond at par with a coupon rate of 6.1% paid…

A: Computation:

Q: gage bond issued by Automation Engineering is for sale for $8,900. The bond has a face value of…

A: Face value =10000 Market price =8900 Coupon =5% MATURITY =9 years Could =500 Annual

Q: A firm has an issue of $1,000 par value bonds with a 12 percent stated interest rate outstanding.…

A: given, par = $1000 coupon rate = 12% n = 10 years r =8%

Q: The Pioneer Petroleum Corporation has a bond outstanding with an $80 annual interest payment, a…

A: Annual coupon payment (C) = $ 80 Market price (P) = $ 900 Par value (F) = $ 1,000 Years to maturity…

Q: Clancey Inc. issues $2,000,000 of 7% bonds due in 10 years with interest payable at year-end. The…

Q: ABC Company's bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment…

A: Par value of bond (FV) = $1000 Annual coupon amount (C) = $70 Years to maturity (n) = 7 Years Market…

Q: An 8 year , $10,000 bond paying a coupon rate of 5.50% compounded semi-annually was purchased at…

A: Using the rate function for YTM calculation

Q: Company issued 25 years bonds with a face value of $1,000 with a coupon rate of 8% and compounded…

A: Par Value of bond is $1,000 Callable price is $1,080 YTM is 7% Coupon rate is 8% Coupon payment is…

Q: Bonds issued by Fresh Farm Company have a par value of $1,000, which is also the amount of principal…

A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…

Q: BSW Corporation has a bond issue outstanding with an annual coupon rate of 7 percent paid quarterly…

A: Fair value of bond = present value of future cashflows of bond, which is given by, Fair value =…

Q: Beluga Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the…

A: Bonds Payable: Bonds Payable are the financial instruments that are issued with a promise or…

Q: Allington Corp. issues $560,000 of 9% bonds that pay interest semiannually and mature in 10 years.…

A: Issue price of the bonds = Present value of principal + Present value of interest payments where,…

Q: MJI Corporation bonds mature in 6 years and have a yeild to maturity of 8.5 eprcent. The par value…

A: Time period = 6 Years × 2 = 12 semi annual periods YTM = 8.5% ÷ 2 = 4.25% Par Value = 1000 Coupon =…

Q: A bond pays dividends of $110 at the end of each year. If the bond matures in 20 years, what is the…

A: Annual dividends (D) = $110 Duration (n) = 20 years Interest rate (r) = 12% Bond price = 1546 Let…

Q: MMB issued 10-year bonds with a coupon rate of 8%. The bond makes semiannual payments. If these…

A: Band is a financial instrument that pays a series of equal payments at equal interval till the…

Q: Champions and Winners Limited issued 20-year bonds a year ago at a coupon rate of 11.4 percent. The…

A: Working note:

Q: Argos Incorporated has issued 4,000 new bond with an 8 percent coupon, paid semi-annually and…

A: Bond valuation is the assurance of the reasonable cost of a bond. Likewise with any security or…

Q: Parkway Vold Co. Issued 14-year bonds two years ago at a coupon rate of 9.2 percent. The bond makes…

A: Borrowings are the liability of the company which is used to finance the requirement of the funds.…

Q: ABC Co. has 9 percent coupon bonds outstanding (coupon is paid annually) that have fourteen years to…

A: Cost of debt = Coupon Amount / Current Price

Q: Bonds issued by American Aero Inc. bear an 8% coupon, payable semiannually. The bonds mature in 10…

A: Using excel RATE function

Q: Watters Umbrella Corp. issued 12-year bonds 2 years ago at a coupon rate of 7.8 percent. The bonds…

A: Using Excel Rate Function

Q: Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 10 percent annual interest.…

A: Using excel PV function

Q: A company has issued $75 million (face value) of bonds with three-years to maturity. They offer an…

A: (Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 10 percent annual interest.…

A: Working note:

Q: Latax Corporation issued 10,000 units of $1,000 face value bonds that mature in 20 years and have a…

A: Here,

Q: ssue price of the bond

Q: Muscat Co. has an outstanding issue of bond with a par value of OMR 1,000, paying 12 % coupon rate…

A: In this question we require to compute the value of the bond from following details: Par value (Face…

Q: An 8% annual bond with a par value of $1,000, fifteen years to maturity, and a current price of $850…

A: Par value = $1000 Coupon rate = 8% Coupon amount = 1000*0.08 = $ 80 Years to maturity = 15 Years…

Q: A corporation’s 18-year bond with 6% par value of 1,000/= paying interest semi-annually and is…

A: Bonds are the debt security which is offered or issued by the corporates or the government to…

Q: Charlie Corporation is a chemical company. The company issued an outstanding bond with a P100,000…

A: Par value of bond (FV) = P100,000 Coupon rate = 8% Quarterly coupon amount (C) = 100,000*0.08/4 =…

Q: A company has issued $75 million (face value) of bonds with three-years to maturity. They offer an…

A: Semiannual coupon rate Semiannual coupon rate is calculated as shown below. Semi-annual…

Q: A corporate bond with a face (par) value of $10,000 will mature 7 years from today (it was issued 3…

A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…

Q: Preston Corporation has a bond outstand with $110 annual interest payment , market price of $1,200,…

A: Yield to maturity (YTM) is the rate which an investor earns when the bond is held till its maturity.

Q: Notting Hill Berhad issued 25-year bonds three years ago. The bonds are currently selling for 97…

A: Face value (F) = RM 1000 Let the coupon rate = c% Coupon (C) = (c% of 1000) / 4 = 2.5c YTM = 9%…

Q: Let us assume that Hono Company has $1,000 par value bonds outstanding that have a 14 percent stated…

A: Par value (F) = $ 1000 Coupon rate = 14% Coupon amount (C) = 1000*0.14 = $ 140 Years to maturity (N)…

Q: Neubert Enterprises recently issued $1,000 par value 15-year bonds with a5% coupon paid annually and…

A: Bonds with warrants gives the bond holder the right to buy the shares of the company that issues the…

Q: A 15-year bond has a $1,000 par value bond, a 4 percent coupon, and a yield to maturity of 3.3…

A: Calculating the current price of bond. We have,Current price of bond = C [1 – (1 / (1+r)n ] / r +…

Q: Muscat Co. has an issue of OMR1,000 par value bonds with a 9% stated interest rate outstanding. The…

A: Using excel PV function

Q: On January 1 of this year, Houston Company issued a bond with a face value of $16,000 and a coupon…

A: Issuance of bond with face value = $16,000 Coupon rate = 5% Maturity period = 3 years

Q: A ten-year 3% bond with semiannual coupons is purchased to yield 6% compounded semiannually. The par…

A: Par value (FV) = 1000 Coupon rate = 3% Semi annual coupon amount (C) = 1000*0.03/2 = 15 Years to…

Question

Company issued 25 years bonds with a face value of $1,000 with a coupon rate of 8% and
compounded semi-annually. This bond is callable after 15 years at $1,080 of face value and current
yield to maturity is 7%. What is the value of callable bond?
$1,120
$1,117
$854
$1,240

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 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

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?
Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity date. Interest is to be paid semi-annually and the market rate of interest is 8%. If the bonds sold at 113.55, what amount was received upon issuance?
Beluga Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 3% when the market rate was 4%. Interest was paid annually. The bonds were sold at 87.5. What was the sales price of the bonds? Were they issued at a discount, a premium, or at par?
On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
Piedmont Corporation issued $200,000 of 10-year bonds at par. The bonds have a stated rate of 6% and pay interest annually. What is the journal entry to record the first interest payment to the bondholders?
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Evie Inc. issued 50 bonds with a $1,000 face value, a five-year life, and a stated annual coupon of 6% for $980 each. What is the total amount of interest expense over the life of the bonds?
On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. $120,000 B. $60,000 C. $7,500 D. $15,000
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
Gingko Inc. issued bonds with a face value of $100,000, a rate of 7%, and a 10-yearterm for $103,000. From this information, we know that the market rate of interest was ________. A. more than 7% B. less than 7% C. equal to 7% D. equal to 1.3%
Issue Price The following terms relate to independent bond issues: 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Required Assuming the market rate of interest is 10%, calculate the selling price for each bond issue.