FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- 1. What is the yield to maturity on the following bonds; all have a maturity of 10 years, a face value of 2000, and a coupon rate of 4 percent (paid semiannually). The bond's current prices are: a. $1,180 b. $ 2,400 c. Explain the relationship between yield to maturity and bond prices.arrow_forwardWhat are the steps and explanation for determining the current value of BondB that matures in 2 years and it has the same interest rate (yield) as Bond A. BondA matures in 1 year, has a current price (PV) of $800 and a face value (FV) of $1000.arrow_forwardUsing the following information, determine the real rate of interest: Rate % inflation 0.69 T-bill 5.00 10y T-Bond 6.00 10y AAA Corporate 6.41 10y AA Corporate 8.24arrow_forward
- Refer to Table 10-2. a. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year time period. b. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 10-year, a 20-year, and a 25-year period. c. Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own? multiple choice 1 10 Years 20 Years 25 Years d. Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own? multiple choice 2 10 Years 20 Years 25 Yearsarrow_forwardUsing the information in Question 14 above, estimate the price of the bond for a 200 basis-point increase in interest rates. O A. $936 B. ³. $1002 C. $964 D. $1012arrow_forwardIf you were to purchase a 12% bond when the market interest rate for such bonds was 11%, would you expect to pay more or less than the face amount for the bond? If you were to purchase a 12% bond when the market interest rate for such bonds was 13%, would you expect to pay more or less than the face amount for the bond? Explain your answers from above?arrow_forward
- What is assumed the be the face value aka par value aka principal aka loan amount of a bond? It's also assumed to be a bond's FV. 10% $0 $100 $1,000arrow_forwardTo calculate WACC of a firm, which of the following should be used as the cost of debt? - Bank deposit rate - Annual yield to maturity of the bond issued by this firm - Risk free rate - 3 Month T bill ratearrow_forward
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