Question

In: Finance

1. Quantitative Problem: Potter Industries has a bond issue outstanding with an annual coupon of 6%...

1. Quantitative Problem: Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 8.6%, what is the value of the bond? Round your answer to the nearest cent. Do not round intermediate calculations.

$___

2. Quantitative Problem: Potter Industries has a bond issue outstanding with a 6% coupon rate with semiannual payments of $30, and a 10-year maturity. The par value of the bond is $1,000. If the going annual interest rate is 8.6%, what is the value of the bond? Round your answer to the nearest cent. Do not round intermediate calculations.

$___

Expert Solution

Solution :

Question 1 . Face Value = $1000, Coupon = 6% Coupon value = 60, time = 10 years ,interest rate (yield) = 8.6%

Using bond value formula

Question 2.

FV = 1000, Coupon = 6% annual = 3% semi-annual, Coupon payment = 30 , yield = 8.6% annual = 8.6% /2 = 4.3% semiannual , Time = 10 years = 10 * 2 semi-annual = 20

jeff jeffy answered 2 years ago

Delta corporation has a bond issue outstanding with an annual coupon rate of 7% and 20...

Delta corporation has a bond issue outstanding with an annual coupon rate of 7% and 20 years remaining until maturity. The par value of the bond is $1,000. What is the current value of the bond if present market conditions justify a 14% required rate of return?

The Palmer Company has an outstanding bond issue with an annual coupon rate of 10 percent,...

The Palmer Company has an outstanding bond issue with an annual coupon rate of 10 percent, the par value of the bond is $ 1,000 and the price is $ 865. The bond will mature in 11 years, what is the required return?

BMW Corporation has a bond issue outstanding with an annual coupon rate of 8.2 percent paid...

BMW Corporation has a bond issue outstanding with an annual coupon rate of 8.2 percent paid quarterly and four years remaining until maturity. The par value of the bond is $1,000. Determine the fair present value of the bond if market conditions justify a 12.5 percent, compounded quarterly, required rate of return. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Fair present value: ??

a corp.has a bond issue outstanding with a annual coupon rate of 8 percent and 20...

a corp.has a bond issue outstanding with a annual coupon rate of 8 percent and 20 years remaining to matunity.The interest payment is paid sermiannually.The par （face)value of the bond is$1,000.Bond investors require an 11 percent annual rate of return under present market conditions.That is,the yield to matunity is 11 percent Determine the intrinsic value of the bond

Problem 17-18 Equity as an Option Sunburn Sunscreen has a zero coupon bond issue outstanding with...

Problem 17-18 Equity as an Option Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the firm’s assets is $11,900. The standard deviation of the return on the firm’s assets is 28 percent per year, and the annual risk-free rate is 4 percent per year, compounded continuously. Based on the Black–Scholes model, what is the market value of the firm’s equity and debt? (Do not...

The Corner Grocer has 7-years , 6 percent annual coupon bond outstanding with a 1,000 par...

The Corner Grocer has 7-years , 6 percent annual coupon bond outstanding with a 1,000 par value . the bond has a yield to maturity of 5.5 percent . which one of the following statements is correct if the market yield suddenly increases 6.5 percent?

Assume that the firm has a bond outstanding that has a coupon rate of 6% and...

Assume that the firm has a bond outstanding that has a coupon rate of 6% and 20 years until maturity. The face value of the bond is $10,000,000 and the coupon payments are made annually. What is the present value of the bond (i.e. current price)? Assume the cost of equity is 12%, the cost of debt is 4% and WACC is 10%. Show calculation Answers: a. $6,594,574.51 b. $12,718,065.27 c. $5,518,333.83 d. $8,276,991.20

Rocket Enterprises has a 20-year bond issue outstanding that pays a 5% coupon. The bond is...

Rocket Enterprises has a 20-year bond issue outstanding that pays a 5% coupon. The bond is currently prices at $915.60 and has par value of $1,000. The bond also pays coupons semiannually. You just purchase ten of them as investment. I What is the yield to maturity of the bond you hold? II Five years go by and interest rates in the economy goes down by 2% and Rocket Enterprises’ bond’s YTM also declines by 2%. Unfortunately, you desperately need...

Problem 1 You buy a 5-year bond with a coupon rate of 6% for $1000 (annual...

Problem 1 You buy a 5-year bond with a coupon rate of 6% for $1000 (annual coupons paid). One year later, you sell the bond. At that time, the yield curve (based on zero coupon bonds) is as follows: T 1 2 3 4 5 rt% 5.50 6.50 7.25 7.75 8.00 a) What is the price of the bond in one year? b) What is the capital gain/loss on the sale of the bond? c) What is your return on...

16. a. Keenan Industries has a bond outstanding with an 8.25% coupon, payable semiannually, and a...

16. a. Keenan Industries has a bond outstanding with an 8.25% coupon, payable semiannually, and a $1,000 par value. The bond's dollar price is $1,066.00 and the bond is callable at 104. The bond's yield to call is 7.41 percent. When can the bond be called (round to the nearest whole year)? b. You turn 35 today, and you plan to save $2,000 each month for retirement, with the first deposit made at the end of this month. You plan...