ABC Inc. recently issued $1,000 par bonds at a 18.96% coupon rate. If the bonds have...

ABC Inc. recently issued $1,000 par bonds at a 18.96% coupon rate. If the bonds have 19 years to maturity and a YTM of 18.16%, what is the current price of the bond? Assume semi-annual compounding.

Solutions

Expert Solution

Given that;
Par value is $1000
Coupon rate is 18.96%
For semiannual compounding, the semi annual coupon rate is 18.96% divided by 2 that is equal to 0.09480
Semiannual coupon payment is=(Par value)*(Semiannual coupon rate)=1000*0.09480=94.80
Time period is 19 years, for semiannual compounding, the number of periods is 19 multiplied by 2 that is equal to 38
YTM is 18.16%, so the semiannual YTM is 0.0908
Now, we can determine the present value of the bond using excel as:

Answer: Hence, the current price of the bond is $1,042.43

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Starbucks recently issued 10-year, $1,000 par value bonds at an 10% coupon rate.. Two years later,...

Starbucks recently issued 10-year, $1,000 par value bonds at an 10% coupon rate.. Two years later, similar bonds are yielding investors 8%. At what price are Starbucks bonds selling? What would the bonds be selling for if yields had risen to 10%?

Orlando Builders Inc. issued a bond with a par value of $1,000, a coupon rate of...

Orlando Builders Inc. issued a bond with a par value of $1,000, a coupon rate of 7.25% (semiannual coupon), and a yield to maturity of 6.60%. The bond has 7 years to maturity. What is the value of the bond? the answer is 1035 but I don't know how to put in the financial calculator. can someone write down each step

Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 6% coupon paid annually and...

Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 6% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with an 8% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond? Do not round intermediate calculations. Round your answer to the nearest cent.

Edgehill, Inc. has 275,000 bonds outstanding. The bonds have a par value of $1,000, a coupon...

Edgehill, Inc. has 275,000 bonds outstanding. The bonds have a par value of $1,000, a coupon rate of 5.2 percent paid semiannually, and 9 years to maturity. The current YTM on the bonds is 5.6 percent. The company also has 10 million shares of stock outstanding, with a market price of $21 per share. What is the company’s market value debt-equity ratio? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

Frusciante, Inc. has 285,000 bonds outstanding. The bonds have a par value of $1,000, a coupon...

Frusciante, Inc. has 285,000 bonds outstanding. The bonds have a par value of $1,000, a coupon rate of 6.9 percent paid semiannually, and 7 years to maturity. The current YTM on the bonds is 6.4 percent. The company also has 9 million shares of stock outstanding, with a market price of $27 per share. What is the company’s market value debt–equity ratio?

ABC Corp. issued 5,000 par value bonds today with 30 years to maturity. The coupon rate...

ABC Corp. issued 5,000 par value bonds today with 30 years to maturity. The coupon rate is 6% and coupons are paid semiannually. The current price of each bond is $890.00. In addition, there are 1,000,000 shares of common stock outstanding with a market price of $22 per share. ABC Corp.’s beta is 1.20, the market risk premium is 10% and the risk free rate is 3%. Assume a tax rate of 30%. Calculate the WACC for ABC Corp.

Axiom Consolidated Bonds have a 5.5% coupon rate and a $1,000 par value. They mature in...

Axiom Consolidated Bonds have a 5.5% coupon rate and a $1,000 par value. They mature in 12 years and pay interest annually. Their YTM is currently 6%. A. Calculate the duration of the Bonds (you may want to use Excel here). B. Would these Bonds be appropriate to include in your portfolio if you expect interest rates to rise? Explain.

Marco Chip, Inc. just issued zero-coupon bonds with a par value of $1,000. The bond has...

Marco Chip, Inc. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 9 years and a yield to maturity of 7.01 percent, compounded semi-annually. What is the current price of the bond? Please show the work as you'd enter it into excel/what formula is used/etc.

Again Inc. bonds have a par value of $1,000, 33 years to maturity and a coupon...

Again Inc. bonds have a par value of $1,000, 33 years to maturity and a coupon rate of 12% paid semiannually. The bonds are currently selling for $1,160. The bonds may be called in 4 years for 112 per 100 of par. What is your expected rate of return if the bond is called in 4 years? (yield to call) I don't know what I'm doing wrong plz do it in excel using the yield function. thank you

BankMart Inc. recently issued bonds that mature in 8 years. They have a par value of...

BankMart Inc. recently issued bonds that mature in 8 years. They have a par value of $1,000 and an annual coupon of 4%. Your required rate of return is 10%. Hint: This bond pays a fixed amount of coupon at the end of each period and pays the par value when it matures. annual coupon payment = par value * annual coupon rate. What is the maximum price you want to pay for the bond?

Subjects