You have been hired to value a new 30-year callable,convertible bond. The bond has a 7 percent coupon,payable annually, and its face value is $1,000. Theconversion price is $60, and the stock currently sellsfor $50. Comparable non-convertible bonds are pricedto yield 9 percent. What is the conversion premiumfor this bond?

Step 1: The calculation of the conversion premium of bond Given:Conversion Price = $60Current…

Answered: You have been hired to value a new…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The market price of a 10-year bond is 957$, its yield to maturity is 8% per year, and annual coupon payments are equal to 957$. The face value of the bond is $1000. Calculate the present value of the bond. Would you buy it? The answer is to be written in the reasons box. Round your answer to the nearest tenth. Optional: Provide calculation details in the reasons box. Answer: Give your reasons
You are given the following spot rates: s1 = 6%, s2 = 7%, s3 = 8%.Calculate the YTM for a 3 year bond that sells for the present value of its cash flows. The bond has 6% coupons that are paid annually and is redeemed for its $1,000 par value. Answer Choices: a) 7.12% b) 7.50% c) 7.76% d) 7.92%
The market price of a 10-year bond is 984$, its yield to maturity is 8% per year, and annual coupon payments are equal to 984$. The face value of the bond is $1000. Calculate the present value of the bond. Would you buy it? The answer is to be written in the reasons box. Round your answer to the nearest tenth. Optional: Provide calculation details in the reasons box.
Your client is considering the purchase of a bond that is currently selling for $1058.15. The client wants to know what annual rate of return can they expect to earn on the bond. The bond has 27 years to maturity, pays a coupon rate of 7.8% (payments made semi-annually), and a face value of $1000, (Round to 100th of a percent and enter your answer as a percentage, e.g. 12.34 for 12.34%) Answer: Check
Consider a(n) Ten-year, 14.5 percent annual coupon bond with a face value of $1,000. The bond is trading at a rate of 11.5 percent. a. What is the price of the bond?b. If the rate of interest increases 1 percent, what will be the bond’s new price?c. Using your answers to parts (a) and (b), what is the percentage change in the bond’s price as a result of the 1 percent increase in interest rates? (Negative value should be indicated by a minus sign.)d. Repeat parts (b) and (c) assuming a 1 percent decrease in interest rates. (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. Price of the bond b. Bond's new price c. Percentage change % d. Bond's new price Percentage change %
You purchase a bond with a par value of $1,000 and an invoice price of $1,044. The bond has a coupon rate of 5.1 percent, and there are 4 months to the next semiannual coupon date. What is the clean price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Clean price _
You have been hired to value a new 20-year callable, convertible bond. The bond has a coupon rate of 5.9 percent, payable semiannually, and its face value is $1,000. The conversion price is $64, and the stock currently sells for $51. a. What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 7 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the conversion premium for this bond? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
You are considering the purchase of a Zero Coupon Bond. This bond has a coupon rate of 0%, a face value of $1000 and a 17-year maturity. The seller is offering the bonds at a price of $830. What is the YTM the seller is offering on the bonds? Assume annual compounding.
You have just been offered a $1,000 par value bond for $847.88. The coupon rate is 8 percent, payable annually, and yields to maturity on new issues of similar risk are 10 percent. You want to know how many more interest payments you will receive, but the party selling the bond cannot remember. Can you determine how many interest payments remain?
A convertible bond has a coupon of 9 percent, paid semiannually, and will mature in 12 years. If the bond were not convertible, it would be priced to yield 8 percent. The conversion ratio on the bond is 25 and the stock is currently selling for $43 per share. What is the minimum value of this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Minimum value
You purchase a bond with a coupon rate of 5.3 percent, a par value $1,000, and a clean price of $860. Assume a par value of $1,000. If the next semiannual coupon payment is due in two months, what is the invoice price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Invoice price
Suppose that a 20-year bond with a coupon rate of 12% is selling at its par value of $100,000. Also suppose that this bond is the deliverable for a futures contract that settles in three months, and the current 3-month interest rate at which funds can be loaned or borrowed is 8% per year. The seller elects to deliver a Treasury bond issue with a conversion factor of 1.20. Also assume that the accrued interest is 7. What is the invoice price that the buyer pays? O $124,600 $125,800 $126,300 $127,100

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