Question

In: Finance

Masson Inc. recently issued noncallable bonds that mature in 10 years.

Masson Inc. recently issued noncallable bonds that mature in 10 years. They have a par value of $1,000 and an annual coupon of 5.5%. If the current market interest rate is 7.0%, at what price should the bonds sell?

Solutions

Expert Solution

Par Value of noncallable Bond = $1000

Annual Coupon payemnt = $1000*5.5%

= $55

No of years to maturity(n) = 10 years

Current market Interest rates(YTM) = 7%

Calculating the Current price of Bond:-

Price = $386.298 + $508.349

Price = $894.65

So, the Price the bond should sell at $894.65

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

MCQ: Legacy Inc. recently issued bonds that mature in 10 years. They have a par value...
MCQ: Legacy Inc. recently issued bonds that mature in 10 years. They have a par value of $1,000 and annual coupon of 6%. The current market interest rate is 8.5%. If the bonds pay interest semiannually, what will be the price of the bonds? Select one: a. 582.73 b. 833.82 c. 782.42 d. 1200.85 e. 1125.75
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?
Churchill Corporation just issued bonds that will mature in 10 years.  George Corporation just issued bonds that...
Churchill Corporation just issued bonds that will mature in 10 years.  George Corporation just issued bonds that will mature in 12 years.  Both bonds are standard coupon bonds and cannot be retired early.  The two bonds are equally liquid.  Which of the following statements is correct? If the yield curve for Treasury securities is flat, Churchill's bond will have the same yield as George's bonds. If the yield curve for Treasury securities is upward sloping, George's bonds will have a higher yield than Churchill's...
Xerox issued bonds that pay $57.50 in interest each year and will mature in 10 years....
Xerox issued bonds that pay $57.50 in interest each year and will mature in 10 years. You are thinking about purchasing the bonds. You have decided that you would need to receive a return of 7 percent on your investment. What is the value of the bond to you, first assuming that the interest is paid annually and then semiannually? a. If the interest is paid semiannually, the value of the bond is _ ?
Gold Enterprises recently issued $40 million of 12% coupon bonds, payable semiannually, which mature in 10...
Gold Enterprises recently issued $40 million of 12% coupon bonds, payable semiannually, which mature in 10 years. The bonds were sold for $37,796,299 to yield a 13% annual rate. Use the table below to show the amortization of the discount, interest expense, and the carrying amount of the bonds from issuance till the end of Period 2. (3/.   ) Interest expense Cash interest paid Discount amortization Discount balance Bond payable, net 0 1 2 Explain in your words why interest...
ABC Co. issued 1 million 6 percent annual coupon bonds that mature in 10 years. The...
ABC Co. issued 1 million 6 percent annual coupon bonds that mature in 10 years. The face value is $1,000 per bond. What are the expected cash flows from one of these bonds?
Bonds issued by United Aerospace Corp. are publicly-traded. The bonds will mature in 15 years and...
Bonds issued by United Aerospace Corp. are publicly-traded. The bonds will mature in 15 years and have a coupon rate of 8 percent. If the market rate of interest increases, then the: Multiple Choice current yield will decrease. coupon rate will also increase. yield to maturity will be less than the coupon rate. coupon payment will increase. market price of the bond will decrease.
Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an...
Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an annual coupon rate of 12%. Interest payments are made semi-annually. The current market rate for similar bonds is 10%. The bonds sell for $1,330,053. Create a table showing the amortized or discount for the first two years of the bonds.
Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an...
Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an annual coupon rate of 12%. Interest payments are made semi-annually. The current market rate for similar bonds is 10%. The bonds sell for $1,330,053. a. Show the journal entries for the bond issuance, first interest payment, and bond retirement at maturity Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an annual coupon rate of 12%. Interest payments...
Jones Inc. issues $5,000,000 of 5% bonds that pay interest semiannually and mature in 10 years....
Jones Inc. issues $5,000,000 of 5% bonds that pay interest semiannually and mature in 10 years. Compute the bonds’ issue price and write down the corresponding journal entries assuming that the bonds’ effective interest rate is: 1) 4% per year market rate semiannually and please tell whether the bond is issued at a premium or discount. Please write down the appropriate journal entries for this discount or premium. 2) 6% per year market rate semiannually and please tell whether the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT