Problem 24-10 Convertible Bonds Vital Silence Corporation has just issued a 30-year callable, convertible bond with a coupon rate of 6.1 percent and annual coupon payments. The bond has a conversion price of $94.30. The company's stock is selling for $27.50 per share. The owner of the bond will be forced to convert if the bond's conversion value is ever greater than or equal to $1,110. The required return on an otherwise identical nonconvertible bond is 7.1 percent. Assume a par value of $1,000. a. What is the minimum value of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the stock price were to grow by 11.2 percent per year forever, how long would it take for the bond's conversion value to exceed $1,110? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Minimum price b. Number of years

Problem 24-10 Convertible Bonds Vital Silence Corporation has just issued a 30-year callable, convertible bond with a coupon rate of 6.1 percent and annual coupon payments. The bond has a conversion price of $94.30. The company's stock is selling for $27.50 per share. The owner of the bond will be forced to convert if the bond's conversion value is ever greater than or equal to $1,110. The required return on an otherwise identical nonconvertible bond is 7.1 percent. Assume a par value of $1,000. a. What is the minimum value of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the stock price were to grow by 11.2 percent per year forever, how long would it take for the bond's conversion value to exceed $1,110? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Minimum price b. Number of years

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.4E

See similar textbooks

Similar questions

Problem 24-3 Bond ratings It is 2030 and the yields on corporate bonds are as follows: Aaa 8% A 10% Ba 12% Tau Corporation wishes to raise $10 million by an issue of 9% 10-year bonds. Assume a face value of $100. What will be the likely issue price (as a percent of face value) if Tau is rated (a) Aaa, (b) A, or (c) Ba? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Aaa bond price b. A bond price c. Ba bond price % of face value. % of face value. % of face value.
Chapter 7 The Valuation and Characteristics of Bonds 325 PROBLEMS Assume All Bonds Pay Interest Semiannually. Finding the Price of a Bond: Concept Connection Example 7-1 (page 295) 1. The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate. a. What is the bond's price today if the interest rate on comparable new issues is 12%? b. What is the price today if the interest rate is 8%? c. Explain the results of parts (a) and (b) in terms of opportunities available to investors. d. What is the price today if the interest rate is 10%? e. Comment on the answer to part (d). oluo hond under the following conl:4:. hor
Fingen's 16-year, $1 comma 000 par value bonds pay 14 percent interest annually. The market price of the bonds is $1 comma 070 and the market's required yield to maturity on a comparable-risk bond is 11 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? Question content area bottom Part 1 a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? enter your response here%
Question 11 Craft & Creams plans to issue bonds with a par value of R1 000 and eight years to maturity. These bonds will pay R40 interest every six months. Current market conditions are such that the bonds will be sold to net R937,79. What is the yield to maturity (YTM) of the issue as a broker would quote it to an investor? 1. 2,48% 2. 4,56% 3. 7,24% 4. 9,11%
Problem 1 Dundee Inc. bonds are currently selling for $1,250. They pay an annual coupon of $90, have a maturity of 25 years and a face value of $1,000, but can be redeemed in 5 years at $1,050. What is the difference between the YTM of this bond and its YTC? Problem 2 Gross Nickle Corporation issued 20-year 7.5% annual coupon bonds at $1,000 face value a year ago. Today, the YTM of these bonds is 5.5%. What is the current price of the bonds?
Problem 8-31 Valuing Bonds Cookie Dough Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,800 every six months over the subsequent eight years, and finally pays $2,100 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 10 percent compounded semiannually. What is the current price of Bond M and Bond N? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Bond M Bond N $ 69 $ 18,451.70 284.91 x
Problem 8.15 Marshall Company is issuing eight-year bonds with a coupon rate of 7.85 percent and semiannual coupon payments. If the current market rate for similar bonds is 9.53 percent. What will be the bond price? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and bond price to 2 decimal places, e.g. 15.25.) Bond price If the company wants to raise $1.25 million, how many bonds does the firm have to sell? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and number of bonds to 0 decimal places, e.g. 5,275.) Number of bonds bonds
Bond valuation relationship the 13 year $1,000 par value bonds of Waco industries pay 12 percent interest annually. The market price of the bond is $1155, and the market's required yield to maturity on a comparable risk bond is 8 percent a. Compute the bond's yield to maturity b. Determine the value of the bond to you given the market's required yield to maturity on a comparable risk bond c. Should you purchase the bond?
Fingen's 18-year, $1,000 par value bonds pay 13 percent interest annually. The market price of the bonds is $1,140 and the market's required yield to maturity on a comparable-risk bond is 10 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? Question content area bottom Part 1 a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? enter your response here%
Question #3 On January 1, 2021 a company issued a bond with a par value of $100,000 at 97. This bond has a coupon interest rate of 10% and will mature in 3 years. This bond will pay the interest expense annually on December 31. Straight-line amortization is used for premiums and discounts. Show the journal entries for the company for this bond. The company records journal entries on an annual basis. Date Асcount DR CR
Question 4 1 Computing Bond Issue Price Abbington Inc. issues $140,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute the bond issue price assuming that the prevailing market rate of interest is: Note: Round your answer to the nearest whole dollar. a. 8% per year compounded semiannually. $0 b. 10% per year compounded semiannually. $0
Question 1 ALLSTON Corporation’s bonds have 15 years remaining to maturity and these bonds have $1,000 par value and a coupon rate of 10%. The bonds have a yield to maturity of 8%: What is the current market price of those bonds? if interest is paid annually (6 marks) if interest is paid semi-annually (7 marks) KENNEDY bonds have 14 years to maturity and have a par value of $1,000 and coupon rate of 12%. If the bonds sell for $850 and the coupon interest rate is 10%; what is their yield to maturity?