Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $930. The par value is $1,000, the coupon rate is 5 percent, and the bond matures in 20 years. The conversion price is $40 and the company's common stock is selling for $32 per share. Interest is paid semiannually. If the interest rate on similar bonds that are not convertible are currently yielding 12 percent, what will be the pure bond value of the Pittsburgh Steel Company bonds? (Use semiannual analysis.) Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Bond value

Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $930. The par value is $1,000, the coupon rate is 5 percent, and the bond matures in 20 years. The conversion price is $40 and the company's common stock is selling for $32 per share. Interest is paid semiannually. If the interest rate on similar bonds that are not convertible are currently yielding 12 percent, what will be the pure bond value of the Pittsburgh Steel Company bonds? (Use semiannual analysis.) Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Bond value

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

You can purchase a $1000 face value bond with 10 years to maturity for $980. The bond pays a semi-annual coupon. The market requires a return of 8%, compounded semi-annually on similar bonds. What is the coupon rate? 7.71% 8% 2% 3.85% 4%
A $1000 face-value coupon bond has a current yield of 5.75% and a market price of $1060. What is the bond’s coupon rate?
You belong to a group of local entrepreneurs that owns a 10-acre blueberry farm. You could farm the land yourselves, or rent it out for $7,000 per year. Another option is to sell the land this year at its market price of $80,000. The price of the land next year will be $78,000. If you sell it, your group has an investment opportunity from which you expect to make a return of 6 percent per year. Question: Whať's the total return from renting the land (i.e., the rental payment minus the economic depreciation) is ? Answers: $7,000. $5,000. $3,000. $1,000.
The current interest rate on a 10-year coupon bond (with face value = $1,000 and annual coupon rate = 3.25%) is 1.31%. The buyer of this bond will receive $ _________ (keep one digit after the decimal point) payment from the bond issuer every year before maturity while holding the bond.
A man invests his savings in two accounts, one paying 6 percent and the other paying 10 percent simple interest per year. He puts twice as much in the lower-yielding account because it is less risky. His annual interest is 6534 dollars. How much did he invest at each rate? Your answer is total in the account paying 6 percent interest is total in the account paying 10 percent interest is
An interest rate of 21 percent per year, compounded every four months, is equal to what rate per year is effective?
Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has coupon rate 4% per annum, and has dirty price $96.42. The second bond matures in twelve months, has coupon rate 11% per annum, and has dirty price $97.79. What is the twelve month spot rate with semi-annual compounding? 13.49% 13.08% 13.94% 13.44%
Find the capital value of a fort at a strategic location, where the annual rent is $750,000, paid in perpetuity, and the interest rate is 5% compounded continuously. The capital value is $.
Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount rate of 6.5%. Which of thé following would give you the present value - i.e. the price – of the bond? Select one: a. Present Value = Price = $10,500/(1.065)² %3D %3D b. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] + ... + [$500/(1.065)NI, where N=00 c. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²] +I$10,000/(1.065)²] %3D d. Present Value = Price = [$500/(1.065)] + [$500/(1.065)²]
A bond with a face value of $7,000 pays quarterly interest of 2.5 percent each period. Twenty-two interest payments remain before the bond matures. How much would you be willing to pay for this bond today if the next interest payment is due now and you want to earn 8 percent compounded quarterly on your money? table of compound interest factors for discrete compounding periods when i=2%.
A young software genius is selling the rights to a new video game he has developed. Another companies have offered him a contract. The contract offers 10 payments, starting with $10 000 at the end of the first year, $13 000 at the end of the second, and so forth, increasing by $3000 each year (i.e., the tenth payment will be $10 000 + 9 × $3000). Assume the genius uses a MARR of 8 percent. What is the present worth of the contract?
Many retirement funds charge an administrative fee equal to 0.25% on managed assets. Suppose that Alexx and Spenser each invest $4,000 in the same stock this year. Alexx invests directly and earns 4% a year. Spenser uses a retirement fund and eams 3.75%. If Alexx and Spenser leave their investments in place for 30 years, with annual compounding of the interest, how much more will Alexx have than Spenser at the end of the 30-year period? Alexx will have more than Spenser after 30 years. (Enter your response rounded to two decimal places.)