The price of the bond with AA rating. Introduction: Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

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Answer 1

Question

Chapter 6, Problem 31P

a.

Summary Introduction

To determine: The price of the bond with AA rating.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

b.

Summary Introduction

To determine: The principal amount of the bond.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

c.

Summary Introduction

To determine: What the rating of the bond must be to sell at par.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

d.

Summary Introduction

To determine: The rating of the bond and to analyze if that bond is junk.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

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HMK Enterprises would like to raise $10.0 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1,000 and a coupon rate of 6.50% (annual payments). The following table summarizes the yield to maturity for five-year (annual-payment) coupon corporate bonds of various ratings a. Assuming the bonds will be rated AA, what will be the price of the bonds? b. How much of the total principal amount of these bonds must HMK issue to raise $10.0 million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond assume that all fractions are rounded to the nearest whole number) c. What must be the rating of the bonds for them to sell at par? d. Suppose that when the bonds are issued, the price of each bond is $902.79 What is the likely rating of the bonds? Are they junk bonds? a. Assuming the bonds will be rated AA, what will be the price of the bonds? The price of the bonds will be $ (Round to the nearest cent.) Data…

AAA company plans to issue bonds to expand operations. The bonds will have a par value of $1,000, a 10-year maturity, and a coupon interest rate of 9%, paid semiannually. Current market conditions are such that the bonds will be sold to net $937.79. What is the yield-to-maturity of these bonds?

Assets, Ic., plans to issue $6 million of bonds with a coupon rate of 11 percent, a par value of $1,000, semiannual coupons, and 15 years to maturity. The current market interest rate on these bonds is 8 percent. In one year, the interest rate on the bonds will be either 12 percent or 8 percent with equal probability. Assume investors are risk- neutral. a. If the bonds are noncallable, what is the price of the bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price of the bonds b. If the bonds are callable one year from today at $1,060, will their price be greater or less than the price you computed in part (a)? O Greater O Lesser

Answer 2

Question

Chapter 6, Problem 31P

a.

Summary Introduction

To determine: The price of the bond with AA rating.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

b.

Summary Introduction

To determine: The principal amount of the bond.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

c.

Summary Introduction

To determine: What the rating of the bond must be to sell at par.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

d.

Summary Introduction

To determine: The rating of the bond and to analyze if that bond is junk.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

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Answer 3

Question

Chapter 6, Problem 31P

a.

Summary Introduction

To determine: The price of the bond with AA rating.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

b.

Summary Introduction

To determine: The principal amount of the bond.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

c.

Summary Introduction

To determine: What the rating of the bond must be to sell at par.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

d.

Summary Introduction

To determine: The rating of the bond and to analyze if that bond is junk.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

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Answer 4

Question

Chapter 6, Problem 31P

a.

Summary Introduction

To determine: The price of the bond with AA rating.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

b.

Summary Introduction

To determine: The principal amount of the bond.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

c.

Summary Introduction

To determine: What the rating of the bond must be to sell at par.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

d.

Summary Introduction

To determine: The rating of the bond and to analyze if that bond is junk.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

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Answer 5

Chapter 6, Problem 31P

a.

Summary Introduction

To determine: The price of the bond with AA rating.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

b.

Summary Introduction

To determine: The principal amount of the bond.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

c.

Summary Introduction

To determine: What the rating of the bond must be to sell at par.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

d.

Summary Introduction

To determine: The rating of the bond and to analyze if that bond is junk.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 6

Chapter 6, Problem 31P

a.

Summary Introduction

To determine: The price of the bond with AA rating.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 7

Chapter 6, Problem 31P

a.

Summary Introduction

To determine: The price of the bond with AA rating.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of the both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 8

b.

Summary Introduction

To determine: The principal amount of the bond.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 9

b.

Summary Introduction

To determine: The principal amount of the bond.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 10

c.

Summary Introduction

To determine: What the rating of the bond must be to sell at par.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 11

c.

Summary Introduction

To determine: What the rating of the bond must be to sell at par.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 12

d.

Summary Introduction

To determine: The rating of the bond and to analyze if that bond is junk.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 13

d.

Summary Introduction

To determine: The rating of the bond and to analyze if that bond is junk.

Introduction:

Bond rating is a credit rating which represents the creditworthiness of both corporate and government bonds. Creditworthiness represents the ability to pay debt, or risk of getting default on a debt. Therefore, bond rating states the degree of risk associated with a bond. This rating is given by credit rating agencies like S&P, Moody, and so on.

Answer 14

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Answer 16

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Answer 17

Ch. 6.1 - What is the relationship between a bonds price and...Ch. 6.1 - The risk-free interest rate for a maturity of...Ch. 6.2 - If a bonds yield to maturity does not change, how...Ch. 6.2 - Prob. 2CC Ch. 6.2 - How does a bonds coupon rate affect its...Ch. 6.3 - How do you calculate the price of a coupon bond...Ch. 6.3 - How do you calculate the price of a coupon bond...Ch. 6.3 - Explain why two coupon bonds with the same...Ch. 6.4 - There are two reasons the yield of a defaultable...Ch. 6.4 - What is a bond rating?

Solution Summary: The author explains that bond rating is a credit rating which represents the creditworthiness of corporate and government bonds.

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