Question
In: Finance
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon...
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon paid semi-annually. Calculate its price for each of the following three YTM scenarios: 4.0%, 6.0%, and 8.0%.
| Input: | Output: | |
| Par ($) | 1,000.00 | |
| Years to maturity | 100 | |
| Annual coupon rate | 6.50% | |
| Coupons per year | 2 | Price |
| Yield to maturity | 4.0% | |
| Yield to maturity | 6.0% | |
| Yield to maturity | 8.0% |
KFA is evaluating a project with the following cash flows in the first 4 years: $4,000, $5,000, $6,000, and $7,000. Use an 8.0% discount rate to calculate the project's net present values (NPV) for three potential initial investments: $11,000 (scenario 1), $13,000 (scenario 2), and $15,000 (scenario 3). Assume no residual value.
| Input: | Output: | Scenario | ||||
| Cash Inflows: | 1 | 2 | 3 | |||
| Year 1 | 4,000.00 | Start | ||||
| Year 2 | 5,000.00 | Year 1 | ||||
| Year 3 | 6,000.00 | Year 2 | ||||
| Year 4 | 7,000.00 | Year 3 | ||||
| Discount rate | 8.0% | Year 4 | ||||
| Initial cost: | ||||||
| Scenario 1 | 11,000.00 | NPV | ||||
| Scenario 2 | 13,000.00 | |||||
| Scenario 3 | 15,000.00 | |||||
Solutions
jeff jeffy answered 5 months agoRelated Solutions
KFA has issued a 100-year coupon bond with par of $1,000, and a 6.50% annual coupon...
KFA has issued a 100-year coupon bond with par of $1,000, and a
6.50% annual coupon paid semi-annually. Calculate its price for
each of the following three YTM scenarios: 4.0%, 6.0%, and
8.0%.
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Group of answer choices
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