Need answer If a bond with a par value of $500 anda call premium of 6% is called inbefore its maturity date, the firm wouldhave to remit the following to thebondholders:a. $500b. $530c. $0d. None of the above

To determine how much the corporation must pay bondholders if a bond is called before its maturity…

Answered: If a bond with a par value of $500 and…

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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(3) Use a 1 bps shock to compute duration and convexity (using approximating measures for duration and convexity, respectively) for the following bond as of the origination date. Origination Date Maturity Date 12/31/2021 12/31/2023 $100 Par Value Annual Coupon Rate 2.00% Рayment frequenсy Quarterly Assume the applicable zero rates for this bond are the following on 12/31/2021 Date Zero rate 12/31/2021 3/31/2022 0.18% 6/30/2022 9/30/2022 0.42% 0.64% 12/31/2022 0.84% 3/31/2023 6/30/2023 9/30/2023 12/31/2023 1.06% 1.24% 1.35% 1.42%
a. Consider a zero-coupon bond with a face value of $60 and five years to maturity. Compute its current fair value at t=0. (only one possible answer) $55.00 $ 57.09 $58.09 $60.00 $100.00 b. Consider a zero-coupon bond with a face value of $60 and five years to maturity. Compute its DV01 at t=0. (only one possible answer) $0.0098 $0.0500 $0.0283 $0.0471 $0.6000
(PLEASE READ THIS DIRECTION)Rules for Bond Valuation Problem Solving:a. For the "PV FACTOR in computing the PV of the coupon and PV for the maturity value/ principal use until 8-9th decimal place" before multiplying the coupon payment or future value.Example: ___x 2.123456789 or 22.12345678b. For "COMPOUNDED RATES" include all decimals in the rate (do not round off).Example semi-annual: 13%/2 =0.065c. For the "VALUE OF THE BOND/ PRICE OF THE BOND" round off your answers and final answers into whole numbers.Example: 824.59= 825 3. Assume that Greenwich and Pizza Hut have similar P100,000 par value bond issues outstanding. The bonds are equally risky. Pizza Hut bond has an annual coupon rate of 8 percent and matures 20 years from today, the nominal annual rate of return is 12%. Greenwich's bond has a coupon rate of 8 percent, with interest paid semiannually, matures in 20 years, and nominal required rate of return 12 percent on a semi-annual basis. What is the DIFFERENCE in current…
(PLEASE READ THIS DIRECTION)Rules for Bond Valuation Problem Solving:a. For the "PV FACTOR in computing the PV of the coupon and PV for the maturity value/ principal use until 8-9th decimal place" before multiplying the coupon payment or future value.Example: ___x 2.123456789 or 22.12345678b. For "COMPOUNDED RATES" include all decimals in the rate (do not round off).Example semi-annual: 13%/2 =0.065c. For the "VALUE OF THE BOND/ PRICE OF THE BOND" round off your answers and final answers into whole numbers.Example: 824.59= 825 1. A bond issued by Delta Corporation matures in 12 years. It has a 12.5 percent annual coupon rate and a face value of P10,000. The bond has a discount rate to maturity of 9.5 percent. What is the price of Omega's bond today?
(PLEASE READ THIS DIRECTION)Rules for Bond Valuation Problem Solving:a. For the "PV FACTOR in computing the PV of the coupon and PV for the maturity value/ principal use until 8-9th decimal place" before multiplying the coupon payment or future value.Example: ___x 2.123456789 or 22.12345678b. For "COMPOUNDED RATES" include all decimals in the rate (do not round off).Example semi-annual: 13%/2 =0.065c. For the "VALUE OF THE BOND/ PRICE OF THE BOND" round off your answers and final answers into whole numbers.Example: 824.59= 8251. Charlie Corporation is a chemical company. The company issued an outstanding bond with a P100,000 par value at 15-year maturity date. The coupon rate is 8%, and interest is paid quarterly. The required nominal interest rate on this borrowings has now increased to 16 percent . What is the current market value of the bond?
The following information about bonds A, B, C, and D are given. Assume that bond prices admit noarbitrage opportunities. What is the convexity of Bond D?Cash Flow at the end ofBond Price Year 1 Year 2 Year 3A 91 100 0 0B 86 0 100 0C 78 0 0 100D ? 5 5 105
Calculating the risk premium on bonds The text presents a formula where (1+1) = (1-p)(1 +i+x) + p(0) where i is the nominal interest rate on a riskless bond x is the risk premium p is the probability of default (bankruptcy) If the probability of bankruptcy is zero, the rate of interest on the risky bond is When the nominal interest rate for a risky borrower is 8% and the nominal policy rate of interest is 3%, the probability of bankruptcy is %. (Round your response to two decimal places.) When the probability of bankruptcy is 6% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) When the probability of bankruptcy is 11% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) The formula assumes that payment upon default is zero. In fact, it is often positive. How would you change the formula in this case?…
(7.4) A bond's yield to maturity should not be confused with its which is a bond's annual coupon divided by its price. Unless the market value of the bond is equal to its the yield to maturity is determined by using a(n) approach. greatesser) te interest rate risk. (7.5) A allows the company to repurchase or "call" part or all of the bond issue at stated prices over a specific period. The difference between the and the is the call premium. Call provisions are often not operative during the first ; during this period of prohibition, the part of a bond's life. This is a bond is said to be
A4)

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If a bond with a par value of $500 and a call premium of 6% is called in before its maturity date, the firm would have to remit the following to the bondholders: a. $500 b. $530 c. $0 d. None of the above