BBL Corp. has a bond issue outstanding that pays $35 every year. It has a face...

BBL Corp. has a bond issue outstanding that pays $35 every year. It has a face value (par value) of $1,000 and will mature in four years. Similar bonds are priced to yield 12% per year. What would you expect this bond to sell for?

$741.83
$698.59
795.84
$860
$1049.73

Expert Solution

n=4

r=12%

PV of face value=1000/(1+12%)^4=1000/1.12^4=1000/1.5735=$635.52

PV of annual payment =A*(1-(1+r)^-n)/r

=35*(1-(1+12%)^-4)/12%

=35*(1-1.12^-4)/0.12

=35*(1-0.6355)/0.12

=35*0.3645/0.12

=$106.31

Total PV=635.52+106.31=$741.83

Hence option a is correct

jeff jeffy answered 2 years ago

Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of...

Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,400, can be converted into common shares at a rate of 61.3002 shares of stock per $1,400 face value bond (the conversion rate), or $22.8384 per share. Hilton’s common stock is trading (on the NYSE) at $22.42 per share and the bonds are trading at $1,375. a. Calculate the conversion value of each bond. (Round your answer to 2 decimal places. (e.g., 32.16)) b....

Rocket Enterprises has a 20-year bond issue outstanding that pays a 5% coupon. The bond is...

Rocket Enterprises has a 20-year bond issue outstanding that pays a 5% coupon. The bond is currently prices at $915.60 and has par value of $1,000. The bond also pays coupons semiannually. You just purchase ten of them as investment. I What is the yield to maturity of the bond you hold? II Five years go by and interest rates in the economy goes down by 2% and Rocket Enterprises’ bond’s YTM also declines by 2%. Unfortunately, you desperately need...

J&J has an outstanding issue of 20- year maturity bond with face value of $1,000 and...

J&J has an outstanding issue of 20- year maturity bond with face value of $1,000 and a coupon of 8%, paying coupon interest semi-annually. If the market price of this bond is $1200, what is the rate of return investors are demanding on this bond?

Meteora, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.35 every...

Meteora, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.35 every year, in perpetuity. This issue currently sells for $95 per share. What is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

A ten-year bond with a face value of $5,000 pays a dividend of $250 every six...

A ten-year bond with a face value of $5,000 pays a dividend of $250 every six months. Calculate the bond interest rate. If the bond is purchased for $3,994.25 at the end of year one, what is the effective annual interest rate? What is the nominal annual interest rate?

CSM Corporation has a bond issue outstanding at the end of the year. The bond has...

CSM Corporation has a bond issue outstanding at the end of the year. The bond has 15 years remaining to maturity and carries a coupon interest rate of 6%. Interest on the bond is compounded on a semiannual basis. The par value of the CSM bond is $1,000 and it is currently selling for $874.42. a. Solve for the yield to maturity. Show your work. b. Solve for the price of the bond if the yield to maturity is 2%...

Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.60 dividend every...

Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.60 dividend every year, in perpetuity. If this issue currently sells for $80.40 per share, what is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Required return %

Cardi B, Inc., has an issue of preferred stock outstanding that pays a $3.15 dividend every...

Cardi B, Inc., has an issue of preferred stock outstanding that pays a $3.15 dividend every year in perpetuity. If this issue currently sells for $72 per share, what is the required return?

scott motors has a bond issue outstanding that pays an 8.50% coupon rate and matures in...

scott motors has a bond issue outstanding that pays an 8.50% coupon rate and matures in 16.5 years. the bonds have a par value of 1,000 and a market price of $944.30. interest is paid semi annually. what is the yield to maturity? Please show me how to do this on financial calculator (BA 2 plus) and details about how you got the numbers. thank you!

Sunburn Sunscreen has a zero coupon bond issue outstanding with a face value of $25,000 that...

Sunburn Sunscreen has a zero coupon bond issue outstanding with a face value of $25,000 that matures in one year. The current market value of the firm’s assets is $27,200. The standard deviation of the return on the firm’s assets is 33 percent per year, and the annual risk-free rate is 4 percent per year, compounded continuously. Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $50,000 that matures in one year. The current...

Question