In: Finance

(Bond valuation)?Fingen's 14?-year, ?$1,000 par value bonds pay 13 percent interest annually. The market price of the bonds is ?$870 and the? market's required yield to maturity on a? comparable-risk bond is 14 percent.

a. Compute the? bond's yield to maturity.

b. Determine the value of the bond to? you, given your required rate of return.

c. Should you purchase the? bond?

a. What is your yield to maturity on the Fingen bonds given the market price of the? bonds?

______?% ?(Round to two decimal? places.)

a. | |||||||||||||

Bonds Yield to maturity | = | =rate(nper,pmt,pv,fv) | Where, | ||||||||||

= | =rate(14,130,-870,1000) | nper | life | 14 | |||||||||

= | 15.30% |
pmt | Coupon payment | $ 130 | |||||||||

pv | Current Price | $ -870 | |||||||||||

fv | Face Value | $ 1,000 | |||||||||||

b. | |||||||||||||

Price of bond | $ 939.98 |
||||||||||||

Working: | |||||||||||||

Price of bond is the present value of cash flow from bond. | |||||||||||||

At 14% market required return; | |||||||||||||

Year | Cash flow | Discount factor | Present Value | ||||||||||

1-14 | $ 130 | 6.002072 | $ 780.27 | ||||||||||

14 | $ 1,000 | 0.15971 | $ 159.71 | ||||||||||

Current Price | $ 939.98 | ||||||||||||

Working: | |||||||||||||

Present Value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | ||||||||||

= | (1-(1+0.14)^-14)/0.14 | i | 14% | ||||||||||

= | 6.002072 | n | 14 | ||||||||||

Present Value of 1 | = | 1.14^-14 | |||||||||||

= | 0.15971 | ||||||||||||

c. | |||||||||||||

Yes |
|||||||||||||

Based on Market required return, price of Bond($939.98) is higher than price of bonds of company ($ 870) . | |||||||||||||

It means Fingen's Bonds are underpriced and it it best time to investment in the bonds of Fingen as cost of bond is lower than market cost. | |||||||||||||

(Bond valuation) Fingen's 16-year,
$1,000 par value bonds pay 14 percent interest annually. The market
price of the bonds is $870 and the market's required yield to
maturity on a comparable-risk bond is 15
percent.
a. Compute
the bond's yield to maturity.
b. Determine
the value of the bond to you, given your required rate of
return.
c. Should
you purchase the bond?
a. What is your yield to
maturity on the Fingen bonds given the market price of the...

Fingen's 13-year, $1,000 par value bonds pay 9 percent
interest annually. The market price of the bonds is $850 and the
market's required yield to maturity on a comparable-risk bond is
10 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you purchase the bond?

7) Part 1. (Bond valuation)Fingen's 19?-year,
?$1,000 par value bonds pay 13 percent interest annually. The
market price of the bonds is ?$1,100 and the? market's required
yield to maturity on a? comparable-risk bond is 10 percent.
a. Compute the? bond's yield to maturity.
b. Determine the value of the bond to? you,
given your required rate of return.
c. Should you purchase the? bond?
Part 2. (Yield to? maturity) Abner?
Corporation's bonds mature in 19 years and pay 11...

Fingen's 12-year, $1,000 par value bonds pay 15 percent
interest annually. The market price of the bonds is $880 and the
market's required yield to maturity on a comparable-risk bond is
16 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you purchase the bond?

Fingen's 15-year, $1,000 par value bonds pay 12 percent
interest annually. The market price of the bonds is $1,100 and
the market's required yield to maturity on a comparable-risk bond
is 9 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you purchase the bond?

Fingen's 15-year, $1,000 par value bonds pay 11
percent interest annually. The market price of the bonds is $920
and the market's required yield to maturity on a comparable-risk
bond is 14 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you purchase the bond?

(Bond valuation relationships)The 14-year,
$1,000 par value bonds of Waco Industries pay 11 percent interest
annually. The market price of the bond is $1,115, and the
market's required yield to maturity on a comparable-risk bond is 8
percent.
a. Compute the
bond's yield to maturity.
b. Determine the
value of the bond to you given the market's required yield to
maturity on a comparable-risk bond.
c. Should you
purchase the bond?
1) What is your yield to maturity on
the...

?(Bond valuation?)
National? Steel's 10-year, ?$1,000 par value bonds pay
8 percent interest annually. The market price of the bonds
is
?$1,200?, and your required rate of return is 7 percent.
a. Compute the? bond's expected rate of
return.
b. Determine the value of the bond to? you,
given your required rate of return.
c. Should you purchase the? bond?

?(Bond valuation?)
National? Steel's 10-year, ?$1,000 par value bonds pay
8 percent interest annually. The market price of the bonds
is
?$1,200?, and your required rate of return is 7 percent.
a. Compute the? bond's expected rate of
return.
b. Determine the value of the bond to? you,
given your required rate of return.
c. Should you purchase the? bond?

The 16-year, $1,000 par value bonds of Waco Industries pay 11
percent interest annually. The market price of the bond is $945,
and the market's required yield to maturity on a comparable-risk
bond is 10 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you given the market's
required yield to maturity on a comparable-risk bond.
c. Should you purchase the bond?

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