Question

In: Finance

Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value...

Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1,000. The bonds are callable at $1,235. One-year interest rates are 9 percent. There is a 60 percent probability that long-term interest rates one year from today will be 10 percent, and a 40 percent probability that they will be 8 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Solutions

Expert Solution

jeff jeffy answered 2 hours ago
Next > < Previous

Related Solutions

Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable...
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,240. One-year interest rates are 11 percent. There is a 60 percent probability that long-term interest rates one year from today will be 12 percent, and a 40 percent probability that they will be 10 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? Assume a...
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable...
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,220. One-year interest rates are 10 percent. There is a 60 percent probability that long-term interest rates one year from today will be 12 percent, and a 40 percent probability that they will be 9 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? Assume a...
Z Manufacturing intends to issue callable, perpetual bonds w/ annual coupon payments. The bonds are callable...
Z Manufacturing intends to issue callable, perpetual bonds w/ annual coupon payments. The bonds are callable at $1,250. One-year interest rates are 11 percent. There is a 60 percent probability that long-term interest rates one year from today will be 13 percent, and a 40 percent probability that they will be 9 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value?
Bond prices. Price the bonds from the following table with annual coupon payments. Par Value Coupon...
Bond prices. Price the bonds from the following table with annual coupon payments. Par Value Coupon Rate Years to Maturity Yield to Maturity Price ​$1,000.00 6​% 25 10​% ​? ​$1,000.00 8​% 30 12% ​? ​$5,000.00 12​% 15 11​% ​? ​$1,000.00 7​% 5 6% ​? a. Find the price for the bond in the following​ table: ​(Round to the nearest​ cent.) Par Value Coupon Rate Years to Maturity Yield to Maturity Price ​$1,000.00 6​% 25 10​% ​$_______ b. Find the price...
e. Your company has an issue of $100 par value annual coupon bonds with 8 years...
e. Your company has an issue of $100 par value annual coupon bonds with 8 years remaining until maturity. The annual coupon rate is 4.10%, along with the current price $92.00 of the bonds. What is the yield to maturity on the bonds?
Keys Printing plans to issue 20-year non-callable bonds at par value. The bonds would pay a...
Keys Printing plans to issue 20-year non-callable bonds at par value. The bonds would pay a 8.40% annual coupon, paid semi-annually. The company's marginal tax rate is currently 36%, but Congress is considering a change in the corporate tax rate to 25%. By how much (i.e., what is the rate difference) would Keys' after-tax cost of debt change if the new tax rate is adopted? Enter your answer in decimal format to four decimal places (e.g., 1.83% would be entered...
A 10-year maturity bond with par value of $1,000 makes annual coupon payments at a coupon...
A 10-year maturity bond with par value of $1,000 makes annual coupon payments at a coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bond for the following bond prices. (Round your answers to 2 decimal places.) Bond prices: 950, 1000, 1050 What are the Bond Equivalent Annual Yield to Maturity and  Effective Annual Yield to Maturity
a.YP Cheang Corporation issued a 20 years, non-callable, 7.5 percent annual coupon bonds at their par...
a.YP Cheang Corporation issued a 20 years, non-callable, 7.5 percent annual coupon bonds at their par value of RM1000 one year ago. Today, the market interest rate on these bonds is 5.5 percent. What is the current price of the bonds, givens that they have 19 years to maturity? b. Penasonik Berhad’s bonds make an annual coupon interest payment of 7.35 percent. The bonds have a par value of RM1000, current price is at RM1130, and mature in 12 years....
17. At issue, coupon bonds typically sell ________. A) above par value B) below par C)...
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...
a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with a par value of $100 issue...
a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with a par value of $100 issue is priced in the market based on the on-the-run 20-year Treasury yield. Assume further that this yield is 5.60%, so that each cash flow is discounted at 5.60% divided by 2. What is the market price of the Treasury issue based on this assumption? b. Suppose also that the price of the same Treasury issue would be $115.285 if it is calculated based on...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT