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

Expert Solution


Related 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​...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT