the big cheese shred it grating agency has issued $1000 face bonds with an 8% coupon....

the big cheese shred it grating agency has issued $1000 face bonds with an 8% coupon. the bonds mature in 8 years and call for semi annual payments they currently have a yield to maturity of 6.5% what will happen to the price of the bond if the market interest rate suddenly decreases to 5%?

bond price will INCREASE/DECREASE but still trade at a PREMIUM/DISCOUNT

OR bond price remains the same

Expert Solution

bond price will INCREASE but still trade at a PREMIUM

Please dont forget to upvote

jeff jeffy answered 1 year ago

(Bonds) A company has an outstanding issue of $1000 face value bonds with 8.75% annual coupon...

(Bonds) A company has an outstanding issue of $1000 face value bonds with 8.75% annual coupon and 10 years remaining until maturity. The bonds are currently selling at a price of 82.50 (82.50% of face value). The company wishes to sell a new a bond issue with a 30-year maturity. Their investment bank has advised that (1) the new 30-year issue could be sold for a flotation cost of 3% of face value, and (2) current yield curves indicate that...

A company issued the following semi-annual bonds: Face amount: $80,000 Coupon rate: 8% ...

A company issued the following semi-annual bonds: Face amount: $80,000 Coupon rate: 8% Yield: 6% Life: 20 years a. Compute the selling price of the bonds. Prepare the journal entry for the issuance of the bonds using the selling price from part (a). c. Prepare the amortization schedule for only the first two interest periods using the interest method. CASH INTEREST EXPENSE AMORTIZATION BOOK VALUE d. Prepare the journal entry to record the first...

On May 1, 2016, Big Star Corporation issued $490,000 face value, 8 percent bonds at 98.7....

On May 1, 2016, Big Star Corporation issued $490,000 face value, 8 percent bonds at 98.7. The bonds are dated May 1, 2016, and mature 10 years later. The discount is amortized on each interest payment date. The interest is payable semiannually on May 1 and November 1. On May 1, 2018, after paying the semiannual interest, the corporation purchased the outstanding bonds from the bondholders and retired them. The purchase price was 99.0. Prepare the entry in general journal...

6/30/y1, $5,000,000 face value bonds, with an 8% coupon rate, are issued to yield 5%. These...

6/30/y1, $5,000,000 face value bonds, with an 8% coupon rate, are issued to yield 5%. These are 20- year bonds, and they pay interest on June 30 and December 31. These bonds were issued for $6,882,706. Please record the following, using the effective interest approach: 6/30/y1 issuance of the bonds. 12/31/y1 payment of interest. 6/30/y2 payment of interest. 12/31/y2 payment of interest.

6/30/y1, $5,000,000 face value bonds, with an 8% coupon rate, are issued to yield 5%. These...

6/30/y1, $5,000,000 face value bonds, with an 8% coupon rate, are issued to yield 5%. These are 20- year bonds, and they pay interest on June 30 and December 31. These bonds were issued for $6,882,706. Please record the following, using the effective interest approach: 6/30/y1 issuance of the bonds. 12/31/y1 payment of interest. 6/30/y2 payment of interest. 12/31/y2 payment of interest.

Your firm has issued ten-year zero-coupon bonds with a $1,000 face value. If the bonds are...

Your firm has issued ten-year zero-coupon bonds with a $1,000 face value. If the bonds are currently selling for $514.87. What is the yield to maturity?

A 3-year $1000 face value bond pays an annual coupon of 8% and has a ytm...

A 3-year $1000 face value bond pays an annual coupon of 8% and has a ytm of 4%. What is this bond's price? What is this bond's duration?

A four-year coupon bond has face value $1000, coupons of 80, and a YTM of 8%...

A four-year coupon bond has face value $1000, coupons of 80, and a YTM of 8% a- what is the bond's current price? b- what is the bond's future value if coupons can be reinvested each year at YTM= 8% ? c- what is the bond's annual return? suppose that next year the interest rate falls to 4% a- what is the bond's future value? b- what is the bond's annual return?

Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature...

Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature in 9 years, have a face value of $1,000, and a yield to maturity of 7.5%. What is the price of the bonds? Round your answer to the nearest cent.

A $1000 par value bonds pays an 8% APR coupon semiannually. If the bond has 10...

A $1000 par value bonds pays an 8% APR coupon semiannually. If the bond has 10 years to maturity and a YTM of 10%, what is its after-tax current yield for an investor paying 25% taxes? Answer: D. 6.9% Please explain how to find this by hand without using Excel.

Question

the big cheese shred it grating agency has issued $1000 face bonds with an 8% coupon....

Solutions

Expert Solution

Related Solutions

(Bonds) A company has an outstanding issue of $1000 face value bonds with 8.75% annual coupon...

A company issued the following semi-annual bonds: Face amount: $80,000 Coupon rate: 8% ...

On May 1, 2016, Big Star Corporation issued $490,000 face value, 8 percent bonds at 98.7....

6/30/y1, $5,000,000 face value bonds, with an 8% coupon rate, are issued to yield 5%. These...

6/30/y1, $5,000,000 face value bonds, with an 8% coupon rate, are issued to yield 5%. These...

Your firm has issued ten-year zero-coupon bonds with a $1,000 face value. If the bonds are...

A 3-year $1000 face value bond pays an annual coupon of 8% and has a ytm...

A four-year coupon bond has face value $1000, coupons of 80, and a YTM of 8%...

Renfro Rentals has issued bonds that have a 8% coupon rate, payable semiannually. The bonds mature...

A $1000 par value bonds pays an 8% APR coupon semiannually. If the bond has 10...