Choice Hotels International originally issued a 10 ⅜ bond in 1992. These $1,000 par value bonds...

Choice Hotels International originally issued a 10 ⅜ bond in 1992. These $1,000 par value bonds mature in five years. What is the value of the Choice Hotels International bond at each of the following required rates of return, assuming the investor will hold the bond to maturity? Assume the coupons are paid annually.

a.8%

b.10.375%

c.12.5%

Solutions

Expert Solution

Use PV function in EXCEL to find the value of the bond

=PV(rate,nper,pmt,fv,type)

1) rate=required rate=8%

nper=5 years

pmt=coupon=coupon rate*face value=10.375%*1000=103.75 (10 3/8=10.375%)

fv=face value=1000

=PV(8%,5,103.75,1000,0)=$1094.83

Price of the bond=$1094.83

2) rate=10.375% and everything remains same.

=PV(10.375%,5,103.75,1000,0)=$1000

Price of the bond=$1000

3) rate=12.5%

=PV(12.5%,5,103.75,1000,0)=$924.34

Price of bond=$924.34

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Company issued 10-year, 11 percent coupon bond with a par value of $1,000. The bonds may...

Company issued 10-year, 11 percent coupon bond with a par value of $1,000. The bonds may be called in 5 years at a call price of $1,150. The bond currently sells for $1,350. You are required to answer the following questions: a) What is the bond's yield to maturity? b) What is the bond's current yield? c) What is the bond's capital gain or loss yield? d) What is the bond's yield to call? e) If you bought this bond...

If you bought a 10-year bond issued by Delta, with a par value of $1,000 and...

If you bought a 10-year bond issued by Delta, with a par value of $1,000 and a coupon interest rate of 6%. At maturity you will receive A. $60. B. $600. C. $1,000. D. $1,600. E. More information would be required to answer the question.

A company issued convertible bonds at $1,000 par value. Bondholders can exchange the bond for 25...

A company issued convertible bonds at $1,000 par value. Bondholders can exchange the bond for 25 shares of common stock at any time prior to maturity. What is the conversion price?

Marco Chip, Inc. just issued zero-coupon bonds with a par value of $1,000. The bond has...

Marco Chip, Inc. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 9 years and a yield to maturity of 7.01 percent, compounded semi-annually. What is the current price of the bond? Please show the work as you'd enter it into excel/what formula is used/etc.

The current price of a 10-year, $1,000 par value bond is $1,000. Interest on this bond...

The current price of a 10-year, $1,000 par value bond is $1,000. Interest on this bond is paid every six months, and the simple annual yield is 14 percent. Given these facts, what is the annual coupon rate on this bond? a. 10% b. 12% c. 14% d. 17% e. 21%

A firm has issued 5,000 10 year zero coupon bonds outstanding (par value 1,000) with a...

A firm has issued 5,000 10 year zero coupon bonds outstanding (par value 1,000) with a YTM of 4%. It has 100,000 common shares outstanding. The stock has a Beta of 1.1. The risk free rate is 2%, and the market return is 8%. The firm is expected to pay a 2.00 dividend and has a growth rate of 3%. If the firm tax rate is 20%, what is the company’s WACC?

A company issued $1,000 par value bond at 6% coupon rate. The bond will mature in...

A company issued $1,000 par value bond at 6% coupon rate. The bond will mature in 6 years. Current market yield for this bond is 7%. If the coupon is paid semi-annually, what would be the value of this bond? Group of answer choices $951.68 $682.29 $973.36 $952.33

Crown Enterprises recently issued a bond that has a $1,000 face or par value. This bond...

Crown Enterprises recently issued a bond that has a $1,000 face or par value. This bond has a coupon interest rate of 6% and has a life of 8 years. If interest is paid annually on this bond, calculate the market value today at t = 0 of this bond, assuming a required return for this bond of 5%. Now, assume that the required return on this bond increases to 8%. Assume also that the bond pays interest semi-annually, rather...

Problem 10-3 Bond value [LO3] Exodus Limousine Company has $1,000 par value bonds outstanding at 10...

Problem 10-3 Bond value [LO3] Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Calculate your final answer using the formula and financial calculator methods. Compute the current price of the bonds if the percent yield to maturity is: (Round your final answers to 2 decimal places. Assume interest payments are annual.) Input variables: Par value $1,000 Coupon rate 10 percent Number of years 50 years a. Yield to maturity...

Starbucks recently issued 10-year, $1,000 par value bonds at an 10% coupon rate.. Two years later,...

Starbucks recently issued 10-year, $1,000 par value bonds at an 10% coupon rate.. Two years later, similar bonds are yielding investors 8%. At what price are Starbucks bonds selling? What would the bonds be selling for if yields had risen to 10%?

Subjects