Peabody Corp. has seven-year bonds outstanding. The bonds pay a coupon of 8.375 percent semiannually and...

Peabody Corp. has seven-year bonds outstanding. The bonds pay a coupon of 8.375 percent semiannually and are currently worth $1,063.49. The bonds can be called in three years at a price of $1,075. (12 points)
1. What is the yield to maturity of these bonds? (3 points)
1. What is the effective annual yield? (3 points)
c. What is the realized yield on the bonds if they are called? (3 points)
1. If you plan to invest in one of these bonds today, what is the expected yield on the investment? Explain. (3 points)

Solutions

Expert Solution

d) If you plan to invest in one of these bonds today, what is the expected yield on the investment is 7.20%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Probiotec Ltd has 7-year bonds outstanding. The bonds pay a coupon of 8.375 per cent semiannually...

Probiotec Ltd has 7-year bonds outstanding. The bonds pay a coupon of 8.375 per cent semiannually and are currently worth $1063.49. The bonds can be called in 3 years at a price of $1075. The bond has a face value of $1000. a What is the yield to maturity on the bond? b What is the effective annual yield? c What is the realised yield on the bonds if they are called? d If you plan to invest in this...

Spartans has 6.5 percent bonds outstanding that mature in 18 years. The bonds pay interest semiannually...

Spartans has 6.5 percent bonds outstanding that mature in 18 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $985 each. What is the firm's pretax cost of debt? Multiple Choice 6.77 percent 6.64 percent 6.94 percent 7.11 percent 6.20 percent

Sandhill, Inc., has four-year bonds outstanding that pay a coupon rate of 7.50 percent and make...

Sandhill, Inc., has four-year bonds outstanding that pay a coupon rate of 7.50 percent and make coupon payments semiannually. If these bonds are currently selling at $918.89. What is the effective annual yield? (Round answer to 1 decimal place, e.g. 15.2%.) Effective annual yield: I got 8.2% but it is wrong

Oriole, Inc., has four-year bonds outstanding that pay a coupon rate of 6.20 percent and make...

Oriole, Inc., has four-year bonds outstanding that pay a coupon rate of 6.20 percent and make coupon payments semiannually. If these bonds are currently selling at $920.89. What is the yield to maturity that an investor can expect to earn on these bonds? (Round answer to 1 decimal place, e.g. 15.2%.) Yield to maturity % What is the effective annual yield? (Round answer to 1 decimal place, e.g. 15.2%.) Effective annual yield % Click if you would like to Show...

Union Local School District has bonds outstanding with a coupon rate of 5.2 percent paid semiannually...

Union Local School District has bonds outstanding with a coupon rate of 5.2 percent paid semiannually and 19 years to maturity. The yield to maturity on these bonds is 4.7 percent and the bonds have a par value of $5,000. What is the dollar price of each bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Union Local School District has bonds outstanding with a coupon rate of 4.6 percent paid semiannually...

Union Local School District has bonds outstanding with a coupon rate of 4.6 percent paid semiannually and 21 years to maturity. The yield to maturity on these bonds is 3.9 percent and the bonds have a par value of 5000. What is the dollar price of each bond?

Whipple Corp. just issued 325,000 bonds with a coupon rate of 6.29 percent paid semiannually that...

Whipple Corp. just issued 325,000 bonds with a coupon rate of 6.29 percent paid semiannually that mature in 30 years. The bonds have a YTM of 6.73 percent and have a par value of $2,000. How much money was raised from the sale of the bonds? (Round your intermediate calculations to two decimal places and final answer to the nearest whole dollar amount.)

Whipple Corp. just issued 290,000 bonds with a coupon rate of 6.08 percent paid semiannually that...

Whipple Corp. just issued 290,000 bonds with a coupon rate of 6.08 percent paid semiannually that mature in 15 years. The bonds have a YTM of 6.52 percent and have a par value of $2,000. How much money was raised from the sale of the bonds?

Lupe has 5% bonds outstanding that mature in six years the bonds pay interest semiannually and...

Lupe has 5% bonds outstanding that mature in six years the bonds pay interest semiannually and have a face value of $1000 currently the barns are selling for $976 the current tax rate is 21% what is the firms pretax cost of debt? A 4.97% B 5.18% C 5.47% D 6.31% E 5.80% General Disco has 8.2% semi annual coupon bonds outstanding that mature in 11 years. The yield to maturity is 7.4% what price are these bonds selling for?...

Best Buy has some bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and...

Best Buy has some bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and have a 8 percent coupon. The current price of the bond is $1010. What is the yield to maturity?

Subjects