Question
In: Finance
(Bond valuation relationships) A bond of Telink Corporation pays $120 in annual interest, with a $1,000...
(Bond valuation relationships) A bond of Telink Corporation pays $120 in annual interest, with a $1,000 par value. The bonds mature in 25 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
13 percent or (ii) decreases to 4 percent?
c. Interpret your findings in parts a and b.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
(Bond valuation relationships) You own a bond that pays $120 in annual interest, with a $1,000...
(Bond valuation relationships) You own a bond that pays
$120 in annual 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 11 percent.
a. Calculate the value of the bond.
b. How does the value change if the yield to maturity on a
comparable-risk bond (i) increases to 16 percent or (ii)
decreases to 8 percent?
c. Explain the implications of your answers in part b as...
(Bond valuation relationships) A bond of Telink Corporation pays $110 in annual interest, with a $1,000...
(Bond valuation relationships) A bond of Telink Corporation
pays $110 in annual interest, with a $1,000 par value. The bonds
mature in 30 years. The market's required yield to maturity on a
comparable-risk bond is 88 percent.
a. What is the value of the bond if the
market's required yield to maturity on a comparable-risk bond is
88 percent?
(Round to the nearest cent.)
b. (i) What is the value of the bond if the
market's required yield to maturity...
(Bond valuation ) You own a bond that pays $120 in annual interest, with a $1,000...
(Bond valuation ) You own a bond that pays $120 in annual
interest, with a $1,000 par value. It matures in 10 years. Your
required rate of return is 11 percent. a. Calculate the value of
the bond. b. How does the value change if your required rate of
return (1) increases to 14 percent or (2) decreases to 7 percent?
c. Explain the implications of your answers in part (b ) as they
relate to interest rate risk, premium...
(Bond valuation) You own a bond that pays $120 in annual interest, with a $1,000 par...
(Bond valuation) You own a bond that pays $120 in annual interest,
with a $1,000 par value. It matures in 15 years. Your requires rate
of return is 10 percent.
a. Calculate the value of the bond.
b. How does the value change if your required rate of return
(1) increases to 16 percent or (2) decreases to 8 percent?
c. Explain the implications of your answers in part (b) as
they relate to interest rate risk, premium bonds, and...
A bond of Telink Corporation pays $120 in annual interest, with a $1,000 par value. The...
A bond of Telink Corporation pays $120 in annual interest,
with a $1,000 par value. The bonds mature in 10 years. The
market's required yield to maturity on a comparable-risk bond is 9
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 14 percent or (ii) decreases to 4 percent?
c. Interpret your findings in parts a and
b.
(Bond valuation relationships) You own a bond that pays $ 110 in annual interest, with a...
(Bond valuation relationships) You own a bond that pays $ 110
in annual interest, with a $1,000 par value. It matures in 10
years. The market's required yield to maturity on a
comparable-risk bond is 10 percent.
a. What is the value of the bond if the
market's required yield to maturity on a comparable-risk bond is
10 percent?
(Round to the nearest cent.)
b. (i) What is the value of
the bond if the yield to maturity on a...
(Bond valuation relationships) You own a bond that pays $100 in annual interest, with a $1000...
(Bond valuation relationships) You own a bond that pays $100
in annual interest, with a $1000 par value. It matures in 15 years.
The market's required yield to maturity on a comparable-risk bond
is 12 percent. a. Calculate the value of the bond. b. How does
the value change if the yield to maturity on a comparable-risk bond
(i) increases to 15 percent or (ii) decreases to 8 percent?
c. Explain the implications of your answers in part b as...
(Bond valuation) You own a bond that pays $120in annual interest, with a $1,000 par...
(Bond valuation) You own a bond that pays $120
in annual interest, with a $1,000 par value. It matures in 10
years. Your required rate of return is 11 percent.a. Calculate the value of the bond.b. How does the value change if your required rate of return (1)
increases to 15 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 bonds, and discount
bonds.d. Assume...
(Bond valuation) You own a bond that pays $100 in annual interest, with a $1,000 par...
(Bond valuation) You own a bond that pays $100 in annual
interest, with a $1,000 par value. It matures in 20 years. Your
required rate of return is 12 percent.
a. Calculate the value of the bond.
b. How does the value change if your required rate of return
(1) increases to 14 percent or (2) decreases to 7 percent?
c. Explain the implications of your answers in part (b) as
they relate to interest rate risk, premium bonds, and...
You own a bond that pays $120 in annual interest, with a $1,000 par value. It...
You own a bond that pays $120 in annual interest, with a
$1,000 par value. It matures in 15 years. The market's required
yield to maturity on a comparable-risk bond is 10 percent.
a. Calculate the value of the bond.
b. How does the value change if the yield to maturity on
a comparable-risk bond (i) increases to 14 percent or (ii)
decreases to 8 percent?
c. Explain the implications of your answers in part b as
they relate to...
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