You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.30 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate=0.70% ces Default risk premium = 1.20% Liquidity risk premium = 0.60% Maturity risk premium=1.80% a. What is the inflation premium? (Round your answer to 2 decimal places.) Expected IP b. What is the fair interest rate on Moore Corporation 30-year bonds? (Round your answer to 2 decimal places.) Fair interest rate

You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.30 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate=0.70% ces Default risk premium = 1.20% Liquidity risk premium = 0.60% Maturity risk premium=1.80% a. What is the inflation premium? (Round your answer to 2 decimal places.) Expected IP b. What is the fair interest rate on Moore Corporation 30-year bonds? (Round your answer to 2 decimal places.) Fair interest rate

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 11PROB

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You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 2.15 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds:Real risk-free rate = 0.75%Default risk premium = 2.05%Liquidity risk premium = 1.40%Maturity risk premium = 2.65% What is the inflation premium? (Round your answer to 2 decimal places.) Expected IP ______.__% What is the fair interest rate on Moore Corporation's 30-year bonds? (Round your answer to 2 decimal places.) Fair Intrest Rate _______.__%
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The wall street journal reports that one-year bonds are currently earning 1.25 percent. Your broker has determined the following information about economic activity and moore corporation bonds: Real risk-free rate = 0.75% Default risk premium = 1.15% Liquidity risk premium = 0.50% Maturity risk premium = 1.75% a. what is the inflation premium? b. what is the fair interest rate on Moore Corporation 30-year bonds?
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 0.40 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.33% Default risk premium = 1.55% Liquidity risk premium = 0.90% Maturity risk premium = 1.05% a. What is the inflation premium?b. What is the fair interest rate on Moore Corporation 30-year bonds? (For all requirements, round your answers to 2 decimal places. (e.g., 32.16)) Inflation Premium= % Fair intrest rate= %
You are considering an investment in 30-year bonds issued by Green Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 5.25 percent. Your broker has determined the following information about economic activity and Green Corporation bonds: Real risk-free rate = 2.25% Default risk Premium = 1.15% Liquidity risk premium = 0.50% Maturity risk premium = 1.75% a) What is the inflation premium? b) What is the fair interest rate on Green Corporation 30-year bonds?
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.75% Default risk premium = 1.15% Liquidity risk premium = 0.50% Maturity risk premium = 1.75% What is the inflation premium? What is the fair interest rate on Moore Corporation 30-year bonds?
a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided. Bond issue price (9 years to maturity) __________________ Bond issue price (8 years to maturity) __________________ b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity. c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%. When the assignment is complete, close the file without saving it again. Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a 2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST. Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges. Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.35 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.65% Default risk premium = 1.25% Liquidity risk premium = 0.70% Maturity risk premium = 1.85% What is the inflation premium? What is the fair interest rate on Moore Corporation 30-year bonds? ( explain all with proper address ) .
determinants of interest rates for individuals securities you are considering an investment in 30 years bonds issued by Moore Corporation. The bonds have no special covenants. The wall street journal reports that 1 year tbills are currently earning 1.25 percent your broker has determined the following information about economic activity and mIrror Corporation bonds: real risk free rate = 0.75% default risk premium = 1.15% liquidity risk premium = 0.50% maturity risk premium= 1.75% a. what is the inflation premium b. what is the fair interest rate on morre corporations 30 year bonds
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.
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants.The Wall Street Journal reports that one-year T-bills are currently earning 3.25 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real interest rate " 2.25% Default risk premium " 1.15% Liquidity risk premium " 0.50% Maturity risk premium " 1.75% What is the inflation premium? What is the fair interest rate on Moore Corporation 30-year bonds?
Problem 4 - Bonds Payable Question Information: REQ A Bond Face Stated Effective Life PAR/PREMIUM/DISCOUNT Issuance Value Interest Interest Rate Rate A $ 100,000 6% 6% 10 years B $ 400,000 8% 6% 10 years C $ 600,000 6% 8% 5 years Insert Computations or Amortization Data analytics or Excel Data tools here: REQ B Compute the proceeds of each bond issuance A B C REQ C For Each, indicate whether the balance sheet value of the bond liability will increase, decrease or remain constant over the life of the bond A B C REQ D For Eaqch bond issuance indicate whether the interest expense recognized each period will increase decrease or remain constant over the life of the bond A B C
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) The 12-year $1,000 par bonds of Vail Inc. pay 11 percent interest. The market's required yield to maturity on a comparable-risk bond is 8 percent. The current market price for the bond is $1,100. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price? a. What is your yield to maturity on the Vail bonds given the current market price of the bonds? nothing% (Round to two decimal places.)