Question

In: Finance

Vulcan, Inc., has bonds with a 7.2% coupon rate and 10 years left to maturity. The...

Vulcan, Inc., has bonds with a 7.2% coupon rate and 10 years left to maturity. The bonds make annual payments and have a face value (or "par value") of $1,000.

If the Yield to Maturity (YTM) on these bonds is 9.2 percent, what does the current bond price have to be?

What financial formula do we use for excel?

Expert Solution

Par value = 1000

Annual couopn amount = par value*coupon rate

=1000*7.2% =72

years to maturity (n) =10

Yield to maturity (i) =9.2%

Current bond price is present value of all coupons received and face value received

Formula of PV used in excel for bond price = -PV(YTM, years to matuirty, Coupn amount, Face value)

=-PV(9.2%, 10, 72, 1000)

=$872.77

Manual formula:

Bond price formula = Coupon amount * (1 - (1/(1+i)^n)/i + face value/(1+i)^n

(72*(1-(1/(1+9.2%)^10))/9.2%) + (1000/(1+9.2%)^10)

=872.7690863

So current price of bond will be $872.77

(please thumbsup)

jeff jeffy answered 2 years ago

A corporate bond with a coupon rate of 7.2 percent has 18 years left to maturity....

A corporate bond with a coupon rate of 7.2 percent has 18 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.9 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 9.2 percent. (Assume interest payments are semiannual.) What will be the change in the bond’s price in dollars? (Negative amount should be indicated...

Vulcan, Inc., has 8 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual pay...

Vulcan, Inc., has 8 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 10 percent, what is the current bond price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Pelzer Printing Inc. has bonds outstanding with 10 years left to maturity. The bonds have a...

Pelzer Printing Inc. has bonds outstanding with 10 years left to maturity. The bonds have a 9% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen to $950.70. The capital gains yield last year was -4.93%. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. % For the coming year, what are...

Ackerman Co. has 10 percent coupon bonds on the market with nine years left to maturity....

Ackerman Co. has 10 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments. If the bond currently sells for $965.16, what is its YTM? Assume a par value of $1,000 0.62% 9.39% 10.23% 9.74% 11.39% Kiss the Sky Enterprises has bonds on the market making annual payments, with 9 years to maturity, and selling for $780. At this price, the bonds yield 7.2 percent. What must the coupon rate be on the...

Compute the price of a 7.2 percent coupon bond with 15 years left to maturity and...

Compute the price of a 7.2 percent coupon bond with 15 years left to maturity and a market interest rate of 10.0 percent. (Assume interest payments are semiannual.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) IS this a Discount or Premium Bond?

Mirha Corp has outstanding bonds with 10 years left to maturity and 5 years left of...

Mirha Corp has outstanding bonds with 10 years left to maturity and 5 years left of call protection. The bonds have a coupon rate of 10%, par value of $1,000, and a call price of $1100. The bonds are currently selling for $1,365. If interest rates remain at current levels, what yield should an investor wishing to hold the bond long-term expect to earn?

1. A semi-annual coupon bond with 25 years until maturity has a coupon rate of 7.2...

1. A semi-annual coupon bond with 25 years until maturity has a coupon rate of 7.2 percent and a yield to maturity of 6 percent. If the par value is $1000, what is the price of the bond?

A bond has 10% coupon rate (coupon paid semiannually) and it has 10 years left to...

A bond has 10% coupon rate (coupon paid semiannually) and it has 10 years left to maturity. The face value is $1000. If the bond currently sold for $1100. What is the yield to maturity? If suddenly the interest rate decreases 2%, what is the new bond price? What is the percentage change of bond price?

A corporation has 10,000 bonds outstanding with a 7% annual coupon rate, 10 years to maturity,...

A corporation has 10,000 bonds outstanding with a 7% annual coupon rate, 10 years to maturity, a $1,000 face value, and a $950 market price. The company’s 400,000 shares of common stock sell for $85 per share, have a beta of 1.2, the risk-free rate is 2%, and the expected market return is 18%. Assuming a tax rate of 35%, what is this corporation’s weighted average cost of capital? Please use excel and show the formulas used if can. Thanks...

A corporate bond with a 5 percent coupon has 10 years left to maturity. It has...

A corporate bond with a 5 percent coupon has 10 years left to maturity. It has a credit rating of BBB and a yield to maturity of 8.0 percent. Recently, the firm has gotten into some trouble and the rating agency is downgrading the firm’s bonds to BB. The new appropriate discount rate will be 9 percent. What will be the change in the bond's price, in dollars? Assume interest payments are paid semi-annually and par value is $1,000. (Round...