Question
In: Finance
Arizona Public Utilities issued a bond that pays $80 in interest, with a $1,000 par value....
Arizona Public Utilities issued a bond that pays $80 in interest, with a $1,000 par value. It matures in 20 years. The market's required yield to maturity on a comparable-risk bond is 6 percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 10 percent or (ii) decreases to 5 percent?
c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds.
d. Assume that the bond matures in 15 years instead of 20 years. Recompute your answers in parts a and b.
e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Arizona Public Utilities issued a bond that pays $80 ininterest, with a $1,000 par value. It...
Arizona Public Utilities issued a bond that pays $80
ininterest, with a $1,000 par value. It matures in 30 years.
Themarket's required yield to maturity on a comparable-risk bond
is 6
percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i) increases to 12 percent
or (ii) decreases to 5 percent?
c. Explain the implications of your answers in part b as they
relate...
PROBLEM: Arizona Public Utilities issued a bond that pays $80 in interest, with a $1,000 par...
PROBLEM:
Arizona Public Utilities issued a bond that pays $80 in
interest, with a $1,000 par value. It matures in 30 years. The
market's required yield to maturity on a comparable-risk bond is
6
percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i) increases to 12 percent
or (ii) decreases to 5 percent?
c. Explain the implications of your answers in part b...
Arizona Public Utilities issued a bond that pays $60 in interest, with a $1,000 par value....
Arizona Public Utilities issued a bond that pays $60 in
interest, with a $1,000 par value. It matures in 30 years. The
market's required yield to maturity on a comparable-risk bond is 8
percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i) increases to 12 percent
or (ii) decreases to 7 percent?
c. Explain the implications of your answers in part b as...
Arizona Public Utilities issued a bond that pays $70 in interest, with a $1000 par value....
Arizona Public Utilities issued a bond that pays $70 in
interest, with a $1000 par value. It matures in 25 years. The
market's required yield to maturity on a comparable-risk bond is
8%.
A. Calculate the value of the bond.
B. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i)increases to 12 percent or
(ii) decreases to 7%?
C. Explain the implications of your answers in part b as they
relate to...
(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $80 in interest, with a...
(Bond valuation relationships) Arizona Public Utilities
issued a bond that pays $80 in interest, with a $1,000 par
value. It matures in 30 years. The market's required yield to
maturity on a comparable-risk bond is 7 percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i) increases to 11 percent
or (ii) decreases to 6 percent?
c. Explain the implications of your answers in...
(Bond valuation) Kyser Public Utilities issued a bond with a $1000 par value that pays $80...
(Bond valuation) Kyser Public Utilities issued a bond with a
$1000 par value that pays $80 in annual interest. It matures in
20 years. Your required rate of return is 9 percent.
a. Calculate the value of the bond.
b. How does the value change if your required rate of return
(1) increases to 12 percent or (2) decreases to 6 percent?
c. Explain the implications of your answers in part (b) as
they relate to interest rate risk, premium...
Bond valuation) New Generation Public Utilities issues a bond with a $1000 par value that pays...
Bond valuation) New Generation Public Utilities issues a bond
with a $1000 par value that pays $80 in annual interest. It matures
in 20 years. Your required rate of return is 7%.
a. Calculate the value of
the bond.
b. How does the value change
if your required rate of return 1) increases to 10% or 2) decreased
to 6%?
c. Explain the implications
of your answers in part b as they relate to interest rate risk,
premium bonds, and...
There is a bond that pays $100 per year interest, with a $1,000 par value. It...
There is a bond that pays $100 per year interest, with a $1,000
par value. It matures in 15 years. The market required yield to
maturity on a comparable bond is 12%. What is the value of the
bond? How does the value change if the yield to maturity on a
comparable bond increase to 15%? What if it decreases to 8%.
Explain the above questions (part b) with the concepts of interest
rate risk, premium bonds and discount bonds....
There is a bond that pays $100 per year interest, with a $1,000 par value. It...
There is a bond that pays $100 per year interest, with a $1,000
par value. It matures in 15 years. The market required yield to
maturity on a comparable bond is 12%.
What is the value of the bond?
How does the value change if the yield to maturity on a
comparable bond increase to 15%? What if it decreases to 8%.
Explain the above questions (part b) with the concepts of
interest rate risk, premium bonds and discount bonds....
a company's bond have a par (face value of 1,000. the bond pays semiannual interest of...
a company's bond have a par (face value of 1,000. the bond pays
semiannual interest of $40 and mature in five years. how much would
you pay for the bond if you required rate is 10% and how much would
you pay if your required rate is 8%
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