Question

In: Finance

29) Within Year, Inc. has bonds outstanding with a $1,000 par value and a maturity of...

29) Within Year, Inc. has bonds outstanding with a $1,000 par value and a maturity of 30 years. The bonds have an annual coupon rate of 8.0% with quarterly coupon payments. You would expect a quoted annual return of 17.0% if you purchased these bonds. What are the bonds worth to you?

$494.04

$474.17

$2,020.50

$622.47

$1,876.38

Expert Solution

$474.17

Working:

Price of bond is the present value of cash flows from bond.

Present Value of coupon interest

$ 467.40

Present value of Par Value

$ 6.77

Present Value of cash flows

$ 474.17

So, price of bond is

$ 474.17

Working:

# 1

Semi annnual coupon interest

=

Face Value * Semi annual coupon rate

=

1000*2%

=

$ 20.00

# 2

Present value of annuity of 1

=

(1-(1+i)^-n)/i

Where,

=

(1-(1+0.0425)^-120)/0.0425

i

17%/4

=

0.0425

=

23.370014

n

30*4

=

120

# 3

Present value of 1

=

(1+i)^-n

=

(1+0.0425)^-120

=

0.0067744

# 4

Present Value of coupon

=

Coupon Interest

*

Present Value of annuity of 1

=

$ 20.00

*

23.37001

=

$ 467.40

# 5

Present value of face value

=

Face Value

*

Present value of 1

=

$ 1,000.00

*

0.006774

=

$ 6.77

jeff jeffy answered 1 year ago

Edgehill, Inc. has 275,000 bonds outstanding. The bonds have a par value of $1,000, a coupon...

Edgehill, Inc. has 275,000 bonds outstanding. The bonds have a par value of $1,000, a coupon rate of 5.2 percent paid semiannually, and 9 years to maturity. The current YTM on the bonds is 5.6 percent. The company also has 10 million shares of stock outstanding, with a market price of $21 per share. What is the company’s market value debt-equity ratio? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

Frusciante, Inc. has 285,000 bonds outstanding. The bonds have a par value of $1,000, a coupon...

Frusciante, Inc. has 285,000 bonds outstanding. The bonds have a par value of $1,000, a coupon rate of 6.9 percent paid semiannually, and 7 years to maturity. The current YTM on the bonds is 6.4 percent. The company also has 9 million shares of stock outstanding, with a market price of $27 per share. What is the company’s market value debt–equity ratio?

Airborne Airlines Inc. has a $1,000 par value bond outstanding with 30 years to maturity. The...

Airborne Airlines Inc. has a $1,000 par value bond outstanding with 30 years to maturity. The bond carries an annual interest payment of $108 and is currently selling for $850. Airborne is in a 20 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk...

the company has an outstanding issue of bonds with a par value of $1,000 and paying...

the company has an outstanding issue of bonds with a par value of $1,000 and paying a 3.80 percent p.a. coupon rate with semi‑annual payments. The bonds were issued 30 years ago and have 15 years to maturity. What should be the current price per bond, assuming a 4.28 percent p.a. yield on comparable securities? please show all calculations on excel

(a) Trump Limited has an outstanding issue of convertible bonds with $1,000 par value. These bonds...

(a) Trump Limited has an outstanding issue of convertible bonds with $1,000 par value. These bonds are convertible into 50 shares of Ali’s common stock. The convertible bonds have a 10% coupon with 10-year maturity. The yield-to-maturity for a straight bond of similar risk is 8%. i. Calculate the straight bond value of the convertible bond. ii. What is the conversion value of the convertible bond when the market price of Trump’s common stock is $30 per share? iii. If...

Question 1 Mel Meyers International Inc. has a series of $1,000 par value bonds outstanding....

Question 1 Mel Meyers International Inc. has a series of $1,000 par value bonds outstanding. Each bond pays interest quarterly and carries a coupon rate of 8%. Some bonds are due in 6 years while others are due in 10 years. Required: If the required rate of return on bonds is 10%, what is the current price of the bonds with 6 years to maturity? If the required rate of return on bonds is 4%, what is the current...

Again Inc. bonds have a par value of $1,000, 33 years to maturity and a coupon...

Again Inc. bonds have a par value of $1,000, 33 years to maturity and a coupon rate of 12% paid semiannually. The bonds are currently selling for $1,160. The bonds may be called in 4 years for 112 per 100 of par. What is your expected rate of return if the bond is called in 4 years? (yield to call) I don't know what I'm doing wrong plz do it in excel using the yield function. thank you

BP has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon...

BP has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon rate of 6.8%, with coupons paid semiannually, and a price of 95.49 (percent of par). What is the cost of debt? answer 3+ decimals

A firm has issued 5,000 10 year zero coupon bonds outstanding (par value 1,000) with a...

A firm has issued 5,000 10 year zero coupon bonds outstanding (par value 1,000) with a YTM of 4%. It has 100,000 common shares outstanding. The stock has a Beta of 1.1. The risk free rate is 2%, and the market return is 8%. The firm is expected to pay a 2.00 dividend and has a growth rate of 3%. If the firm tax rate is 20%, what is the company’s WACC?

Mirha Corp has $40 million of outstanding bonds. The bonds have a $1,000 par value and...

Mirha Corp has $40 million of outstanding bonds. The bonds have a $1,000 par value and a 10% coupon rate. They were issued 5 years ago, with 25 years of original maturity, and flotation cost of $200,000. The firm could call these bonds at a 10% call premium. The firm has an opportunity to issue $40 million of bonds with maturity of 20 years and a 7.5% interest rate. The new bonds would require flotation costs of $250,000. To ensure...