7 years ago Sunland Corporation issued 20-year bonds that had a $1,000 face value, paid interest...

7 years ago Sunland Corporation issued 20-year bonds that had a $1,000 face value, paid interest annually, and had a coupon rate of 7 percent. If the market rate of interest is 5.5 percent today, what is the current market price of an Sunland Corporation bond?

Current market price _____

Solutions

Expert Solution

Number of remaining periods = 20 - 7 = 13

Annual coupon = 7% of 1000 = 70

Current market price = Coupon * [1 - 1 / (1 + rate)^time] / rate + Face value / (1 + rate)^time

Current market price = 70 * [1 - 1 / (1 + 0.055)^13] / 0.055 + 1000 / (1 + 0.055)^13

Current market price = 70 * [1 - 0.49856] / 0.055 + 498.56068

Current market price = 70 * 9.11708 + 498.56068

Current market price = $1,136.76

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

1) Exactly five years ago, WSGD Holdings issued 20-year bonds with a $1,000 face value. These...

1) Exactly five years ago, WSGD Holdings issued 20-year bonds with a $1,000 face value. These bonds pay $55 in coupon payment every six months. The bonds currently sell for $950. Due to additional financing needs, the firm has decided to issue new bonds that will have a maturity of 20 years, a par value of $1,000, and pay 4% coupon every six months. If both bonds have the same yield, how many new bonds must WSGD Holdings issue to...

Suppose a US company issued 10-year bonds 5 years ago with a face value of $1,000...

Suppose a US company issued 10-year bonds 5 years ago with a face value of $1,000 and an annual coupon rate of 6%. The coupons are paid semi-annually and the bonds are currently trading in the market at a price of $1,089.83. The company is considering whether to call the bonds and issue new 5- year bonds at a par value of $1,000. Based on this information, answer the following four questions. (i) What is the yield to maturity on...

________ 16. Seven years ago, Peterborough Trucking issued 15-year bonds with a face value of $1,000...

________ 16. Seven years ago, Peterborough Trucking issued 15-year bonds with a face value of $1,000 each. Today, the market rate of return on these bonds is 7.9 percent and the market price is $984.20 The bonds pay interest semi-annually. What is the coupon rate? a. 6.67 percent b. 6.85 percent c. 7.63 percent d. 7.76 percent ________ 18. Today, you paid a total of $1,108.16 to purchase a $1,000 bond. The bond has a 6...

Several years ago, Castles in the sand Inc. issued bonds at face value of 1,000 at...

Several years ago, Castles in the sand Inc. issued bonds at face value of 1,000 at a yield to maturity of 8.6%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is the price of the bond now? (Assume semi-annual coupon payments) Suppose that investors believe that Castles can make good on the promise coupon payments but that...

Adonis Corporation issued 10-year, 7% bonds with a par value of $130,000. Interest is paid semiannually....

Adonis Corporation issued 10-year, 7% bonds with a par value of $130,000. Interest is paid semiannually. The market rate on the issue date was 6%. Adonis received $139,674 in cash proceeds. Which of the following statements is true? Adonis must pay $139,674 at maturity plus 20 interest payments of $4,550 each. Adonis must pay $130,000 at maturity plus 20 interest payments of $4,550 each. Adonis must pay $130,000 at maturity plus 20 interest payments of $3,900 each. Adonis must pay...

A government bond with a face value of $1,000 was issued eight years ago and there...

A government bond with a face value of $1,000 was issued eight years ago and there are seven years remaining until maturity. The bond pays annual coupon payments of $90, the coupon rate is 9% pa and rates in the marketplace are 9.5% p.a. What is the value of the bond today? a. $975.25 b. $1,427.50 c. $1,000.00 d. $972.83 e. $962.14

A corporate bond was issued a few years ago at face value of $1,000 with a...

A corporate bond was issued a few years ago at face value of $1,000 with a YTM of 7% and quarterly paid coupons. Now with 12 years left until the maturity, the company has run into hard times and the yield to maturity has increased to 15%. 1) What is the bond price now? 2) Suppose the company defer the loss to future and will make good on the promised coupon payments. However, the deferred loss will finally drive the...

Berlin Corporation has $1,000 par value, 10-year bonds outstanding that were issued five years ago with...

Berlin Corporation has $1,000 par value, 10-year bonds outstanding that were issued five years ago with a stated annual coupon rate of 6% with annual interest payments. These bonds now have five years remaining to maturity. Please calculate the value of these bonds today if the market rate of return is 8%? 6%? And 4%? What can you say about the relationship between the coupon rate, the market rate, and the value of bonds?

Goal Corporation issued $900,000 face value 7 percent 5-year bonds on 1/1/2021. The bonds pay interest...

Goal Corporation issued $900,000 face value 7 percent 5-year bonds on 1/1/2021. The bonds pay interest semiannually and were sold to yield 8 percent. The bonds were purchased by Shot Company. a. What is the issuance price of the bond? ___________________ b. Prepare the entry that Goal will make to record the issuance of the bonds. c. Prepare the entry that Goal will make to record the first interest payment. d. Prepare the entry that Goal will make to record...

GM issued a $ 1,000, 30-year bond 5 years ago at 9 % interest. Comparable bonds...

GM issued a $ 1,000, 30-year bond 5 years ago at 9 % interest. Comparable bonds yield 6 % today. What should GM’ bond sell for now? Define each variable in the equation P = (D1 + P1) / (1 + R) Solve the NPV and solve for the Payback YR Cash Flow 0 -$26,000 1 11,000 2 14,000 3 11,000 with the required rate equal to 6% 4. Use the following tax brackets for taxable income: Bracket:...

Subjects