7 years ago, Delicious Mills, Inc. issued 30-year to maturity bonds that had a 8.10 percent...

7 years ago, Delicious Mills, Inc. issued 30-year to maturity bonds that had a 8.10 percent annual coupon rate, paid semiannually. The bonds had a $1,000 face value. Since then, interest rates in general have changed and the yield to maturity on the Delicious Mills bonds is now 10.92 percent. Given this information, what is the price today for a Delicious Mills bond?

Expert Solution

Par/Face value	1000
Annual Coupon rate	0.081
Annual coupon	81
semi-annual coupon	40.5

Present Value = Future value/[(1+(r/m))^mt]
r is the interest rate that is 10.92%.
m is the compounding period that is 2
mt is the time period.
price of the bond = sum of present values of future cash flows
r/2	0.0546	r	0.1092
mt	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23
future cash flow	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	40.5	1040.5
present value	38.40319	36.41493	34.52961	32.74191	31.04675	29.43936	27.91519	26.46994	25.0995	23.80002	22.56782	21.39941	20.2915	19.24094	18.24478	17.30019	16.4045	15.55519	14.74984	13.9862	13.26209	12.57547	306.3539
sum of present values	817.79

The price today for a Delicious Mills bond is $817.79.

jeff jeffy answered 1 year ago

21 years ago, Delicious Mills, Inc. issued 30-year to maturitybonds that had a 9.78 percent...

21 years ago, Delicious Mills, Inc. issued 30-year to maturity bonds that had a 9.78 percent annual coupon rate, paid semiannually. The bonds had a $1,000 face value. Since then, interest rates in general have changed and the yield to maturity on the Delicious Mills bonds is now 8.93 percent. Given this information, what is the price today for a Delicious Mills bond? Round the answer to two decimal places. Financial calculator can be used.

Dexter Mills issued a 25-year bonds two years ago at a coupon rate of 10.2 percent....

Dexter Mills issued a 25-year bonds two years ago at a coupon rate of 10.2 percent. The bonds make semiannual payments. The yield-to-maturity on these bonds is 9.2 percent. What is the current bond price? I got $5316.51, but I am unsure of my answer so would like confirmation + see the work to get the answer. Thanks!

Dexter Mills issued 20-year bonds a year ago at a coupon rate of 10.2 percent. The...

Dexter Mills issued 20-year bonds a year ago at a coupon rate of 10.2 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 9.2 percent, what is the current yield of the bond? Question 33 options: 10.35% 10.28% 9.79% 9.37% 9.29%

SCTYQ issued 9,000 bonds 5 years ago with 30 years to maturity when they were issued....

SCTYQ issued 9,000 bonds 5 years ago with 30 years to maturity when they were issued. The coupon rate is 2.4% and coupons are paid annually. The current price of each bond is $568.81. In addition, there are 500,000 shares of common stock outstanding with a market price of $21 per share. SCTYQ’s beta is .90 the risk-free rate is 2%. SCTYQ is expected to pay a dividend of $1.06, with a 6% growth rate Assume a tax rate of...

Five years ago, San Francisco Berhad issued $10,000,000 of corporate bonds with a 30-year maturity. The...

Five years ago, San Francisco Berhad issued $10,000,000 of corporate bonds with a 30-year maturity. The bonds have a coupon rate of 10.125% pay interest semiannually and have a par value of $1,000 per bond. The bonds are currently trading at a price of $879.625 per bond. At the same time, a 25-year Treasury bond with a 6.825% coupon rate (paid semiannually) and $1,000 par is currently selling for $975.42. Determine the yield spread between the corporate bond and the...

1. Sand Sweet Corp. issued 20 year bonds three years ago (maturity 2036) with a 7%...

1. Sand Sweet Corp. issued 20 year bonds three years ago (maturity 2036) with a 7% coupon, with interest paid semi-annually. Market and company circumstances have changed so that the current risk factor on the bonds has dropped to 6%. What is the current market price of the bonds? (THINK ABOUT THE CORRECT NUMBER OF INTEREST PAYMENTS; SHOULD PRICE BE MORE OR LESS THAN 1000?) 2. Chapter LTD has bonds on the market with fifteen years remaining until maturity which...

Smith Corporation issued convertible bonds 5 years ago with an original maturity of 30 years, coupon...

Smith Corporation issued convertible bonds 5 years ago with an original maturity of 30 years, coupon of 4.5%, and annual payment. They were sold at their par value of $1,000 and with a conversion price of $28.57. Common stock at the time was selling for $14 per share. During the last 5 years, the stock price has not exceeded $22 per share. Straight nonconvertible debentures issued at approximately the same time had a coupon rate of 7.2%. During the next...

The XGENZ Corporation issued a 30-year, 7 percent semiannual bond 3 years ago. The bond currently...

The XGENZ Corporation issued a 30-year, 7 percent semiannual bond 3 years ago. The bond currently sells for 93 percent of its face value. The company’s tax rate is 35 percent. a. What is the pretax cost of debt? b. What is the aftertax cost of debt? c. Which is more relevant, the pretax or the aftertax cost of debt? Why? d. Suppose the book value of the debt issue is $85 million. In addition, the company has a second...

EXCEL TEMPLATE) Watchstone Concrete Products issued 30-year maturity bonds 15 years ago with a coupon rate...

EXCEL TEMPLATE) Watchstone Concrete Products issued 30-year maturity bonds 15 years ago with a coupon rate of 10.75%. The principal amount was $15,000,000. Interest rates have steadily decreased and the company could issue new bonds today at a coupon rate of 9.50%. The new issue would be used to pay off the old bonds and would have a maturity of 15 years. The original issue had flotation costs of $375,000 which were set up on an amortization schedule over 30...

Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a...

Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a coupon rate of 8%. The bonds are now selling to yield 5%. The company also has 15,000 shares of preferred stock outstanding that pay a dividend of $6.50 per share. These are currently selling to yield 10%. Its common stock is selling at $21, and 200,000 shares are outstanding. Assume that the coupon payments are semi-annual. Calculate Hemingway's market value based capital structure. Round...

Question