Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
Question
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Chapter 10, Problem 17P

a.

Summary Introduction

To calculate: Lance Whittingham IV - The price of the bond of Leisure Time Corporation.

Introduction:

Bond Valuation:

It refers to a method of determining the value of a bond based on certain inputs, such as coupon rate, time to maturity, and yield to maturity. This technique calculates the present value of the future cash flows of the bond, which also includes its face value that is expected to be received at maturity.

b.

Summary Introduction

To calculate: The price of the bond issued by Leisure Time Corporation.

Introduction:

Bond Valuation:

It refers to a method of determining the value of a bond based on certain inputs, such as coupon rate, time to maturity, and yield to maturity. This technique calculates the present value of the future cash flows of the bond, which also includes its face value that is expected to be received at maturity.

c.

Summary Introduction

To calculate: The compounded annual rate of growth in the value of the bond.

Introduction:

Compounded Annual Gro wth Rate (CAGR):

It is defined as the rate of return necessary for an investment to evolve until its final value. This return is based on the assumption that profits or interests are reinvested every year throughout the investment.

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Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 4 percent annual interest and has 18 years remaining to maturity. The current yield to maturity on similar bonds is 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. What is the current price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Current price of the bond b. By what percent will the price of the bonds increase between now and maturity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Price increases by
Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 7 percent annual interest and has 16 years remaining to maturity. The current yield to maturity on similar bonds is 11 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. What is the current price of the bonds? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Current price of the bond b. By what percent will the price of the bonds increase between now and maturity? Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Percentage increase in price of bond %
Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond with semiannual payments has 4 percent annual interest and has 15 years remaining to maturity. The current yield to maturity on similar bonds is 10 percent. (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. What is the current price of the bonds? Use Appendix B and Appendix D. Current price $538.83 b. By what percent will the price of the bonds increase between now and maturity? Price increases by c. What is the annual compound rate of growth in the value of the bonds? (Use Appendix A) Annual compound rate 85.59% 4.21%

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Loose Leaf for Foundations of Financial Management Format: Loose-leaf

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