Q3) Referring to the two corporate bonds' data at below table, answer the following: If the market interest rate was 10%, what would the bonds prices be? Would you consider both bonds to be selling at a discount, premium, or at par value and why? Explain what it means when a bond is selling at a discount, a premium, or at its par value. Bond A Bond B Maturity Years 20 30 Coupon Rate (Paid Semiannual) 12% 8% Par Value (OMR) 1000 1000

Q3) Referring to the two corporate bonds' data at below table, answer the following: If the market interest rate was 10%, what would the bonds prices be? Would you consider both bonds to be selling at a discount, premium, or at par value and why? Explain what it means when a bond is selling at a discount, a premium, or at its par value. Bond A Bond B Maturity Years 20 30 Coupon Rate (Paid Semiannual) 12% 8% Par Value (OMR) 1000 1000

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 2EP

See similar textbooks

Similar questions

B. Complete the information below using Bonds. Redemption Value (F) Conversion per year (m) Bimonthly Coupon Payments (k) Bond Rate (r) 11. 18% P7.50 P680 Quarterly 11% 12. P900 Quarterly 12.8% 13. P1,300 Bimonthly 12% 14. 15. Annually 15% P105.00
4. What is the carrying value of the bonds at the end of the second period (third number)? Premium 57,913.01 Carrying value (bonds) 432,913.01 Face Rate Market Rate Semiannual payments a. b. Cash Payment C. d. e. 14% 10% 0 or 1 2 or 3 4 or 5 6 or 7 8 or 9 Interest Expense Today Period #1 26,250.00 Period #2 26,250.00 Carrying value at end of second period (third number) ___________?__ 2. Disc. or Prem. Amort. 21,645.65 21,415.43 Disc. or Prem. 4,604.35 4,834.57 57,913.01 53,308.66 48,474.10 Face Value 375,000.00 375,000.00 375,000.00 Carrying Value 432,913.01 428,308.66 423,474.10
A4) Finance On August 16, 2012, a bond had a market price of $8,240.66 and accrued interest of $157.95 when the market rate was 8%What is the bond's face value if it matures on May 15, 2033?
he following information is about the spot rates on Treasury securities and BBB corporate bond: Spot 1 Year Spot 2 Year Spot 3 Year Treasury 3% 4.75% 5.5% BBB Corporate Debt 7.5% 9.15% 10.5% Question: What is the implied forward rates on one-year maturity BBB corporate debt to be delivered in year 3?
3) Answer the below questions for bonds A and B. Bond A 8% 8% 2$100.00 $100.00 $100.00 $104.055 CouponYield to maturity Maturity (years) ParPrice Bond B 9% 8% (a) Calculate the actual price of the bonds for a 100-basis-point (1% annual) increase in interest rates. (b) Using (modified) duration, estimate the price of the bonds for a 100-basis- 5 point (1% annual) increase in interest rates.(c) Explain why your answers in parts (a) and (b) differ.
Q3) The Omani Company has two bond issues outstanding. Both bonds pay OMR (100) annual interest plus OMR (1000) face value at maturity. Bond L has a maturity of 15 years, sell after three years issued, and Bond S has a maturity of 1 year. a. What will be the value of each of these bonds when the going rate of market interest is 12%? b. what can you conclude from the results of the above questions regarding the bond risks?
The following information is about the spot rates on Treasury securities and BBB corporate bond: Spot 1 Year Spot 2 Year Spot 3 Year Treasury 3% 4.75% 5.5% BBB Corporate Debt 7.5% 9.15% 10.5% Question: Using the implied forward rates, estimate the annual marginal default probability for the one-year BBB corporate debt in year 3?
c. How do the interest rate changes affect premium bonds and discount bonds?Bonds, in general, (decrease or increase) in price when interest rates go up. When interest rates decrease, bond prices (decrease or increase) .d. Suppose the bond were to mature in 12 years. What will be the bond’s price if rates in the market (i) decrease to 9.86 percent or (ii) increase to 13.86 percent? (Round intermediate calculations to 2 decimal places, e.g. 1.25 and final answer to 2 decimal places, e.g. 15.25.) (i) Bond's price if rate decrease to 9.86 percent $ (ii) Bond's price if rate increase to 13.86 percent $
S14-4 Pricing bonds Bond prices depend on the market rate of interest, stated rate of interest and time. Requirements 1. Compute the price of the following 8% bonds of Country Telecom. a. $100,000 issued at 75.25 c. $100,000 issued at 94.50 b. $100,000 issued at 103.50 d. $100,000 issued at 103.25 2. Which bond will Country Telecom have to pay the most to retire at maturity: Explain your answer.
Consider the following two Treasury securities: Bond Price Modified duration (years) A $100 6 B $80 7 For a 25 basis-point change in interest rates, which bond has the greatest percentage change in price? A. Bond A B. Bond B C. Can't be determined
Give typing answer with explanation and conclusion 1- Imagine the bond above displayed the following details: $10,000 Matures: January 31, 2030; Interest of $200 payable June 30 and December 31 of each year. Can you calculate the annual effective interest rate for this bond? a)2% b)4% c)6% d)One cannot tell.
Consider the following two Treasury securities: Bond Price Modified duration (years) A $100 6 B $80 7 For a 25 basis-point change in interest rates, what is the percentage change in price for Bond A? A. -2.00% B. -1.50% C. 3.00% D. 3.50%