In: Finance

Explain why some bonds sell at a premum over par value while other bond sell at a discount?

-The Price of the Bond is the Present Value of the Coupon Payments plus the Present Value of the Face Value/Par Value

-If the coupon rate of a bond is above the current market interest rates, a bond will sell at Premium.

-When pricing bonds, there is an inverse relationship between the Market price and market interest rate or Yield to Maturity of the Bond

-The Market Price of the Bond is the Present Value of the Coupon Payments plus the Present Value of the face Value

-If the Market Interest Rate Increases, then the discounting rate will be higher & the discounting factor will be lower and it will result’s in the Market Price of the Bond to be lower.

-If the Market Interest Rate Decreases, then the discounting rate will be lower & the discounting factor will be higher and it will result’s in the Market Price of the Bond to be higher.

- If the Yield to Maturity [YTM] is greater than the coupon rate, then the selling price of the bond will be less than its par value, since the bonds are selling at discount

- If the Yield to Maturity [YTM] is less than the coupon rate, then the selling price of the bond will be more than its par value, since the bonds are selling at premium.

Why do some bonds sell at a premium, some at par and some at a
discount? What are some advantages and disadvantages of investing
in bonds?
Your answer should be a paragraph that contains at least four
(4) sentences but no more than ten (10) sentences

The carrying (book) value of a bond payable is the par value of
the bonds plus any discount or minus any premium.
True or False

1. Meacham Enterprises' bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?2. Currently, Bruner Inc.'s bonds sell for $1,250. They pay a $120 annual coupon, have a 15-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other...

Marco Verratti's bonds currently sell for $1,175.89 with par
value of $1,000.00. The bonds pay 13.00 percent coupon rate and
have a 17-year maturity, but they can be called in 6 years at
$1,097.00. There are no costs but the call premium and refund the
bonds. In addition, assume that the yield curve is horizontal, with
rates expected to remain at current levels on into the future. What
is the bonds’ yield to maturity? What is the bonds’ yield to...

A firm’s bonds currently sell for $1,180 and have a par value of
$1,000. They pay a $105 annual coupon and have a 15-year
maturity, but they can be called in 5 years at
$1,100. What is their yield to call (YTC)?

17. At issue, coupon bonds typically sell ________.
A) above par value
B) below par
C) at or near par value
D) at a value unrelated to par
E) none of the above
18. Accrued interest
A) is quoted in the bond price in the financial press.
B) must be paid by the buyer of the bond and remitted to the
seller of the bond.
C) must be paid to the broker for the inconvenience of selling
bonds between maturity...

The value of the dollar is monitored by bond market participants
over time.
a. Explain why expectations of a
weak dollar could reduce bond prices in the U.S.
b. On some occasions, news of the
dollar weakening did not have any impact on bond markets. Assuming
that no other information offsets the impact, explain why the bond
markets may not have responded to the announcement.

Stark Industries wants to sell 15-year bonds that pay interest
annually. The par value of bonds will be at $1,000. Stark
Industries stock is selling for $45 per share, and each bond issued
will have 50 warrants attached to it. Each warrant is exercisable
into one share of stock at an exercise price of $50. Stark
Industries straight bonds yield 10%. Each warrant is expected to
have a market value of $4.00 given that the stock sells for $45. In...

What makes bonds sell at a premium, par value, or discount?
Please show and describe the dividend discount model of common
stock valuation. Are the costs of debt and equity observable in the
capital markets? If not how do you estimate that cost of capital?
The expected annual cash flow on a restaurant is $300,000 (assume
growth = 0%), and my cost of equity capital for restaurants if
33.3% (restaurants are very risky!). What is the maximum price I am...

Ford Motor Company has bonds that currently sell for $1,140 and
have a par value of $1,000. They pay a $105 annual coupon and have
a 15-year maturity, but they can be called in 5 years at $1,100.
What is their yield to call (YTC)?
Group of answer choices
8.07%
7.74%
8.62%
7.35%

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