QUESTION:
a) If a coupon bond of 19 years that pays an 9.7% coupon, has
a...
QUESTION:
a) If a coupon bond of 19 years that pays an 9.7% coupon, has
a face value of GH¢ 1,000 and the prevailing discount rate is
13.6%, compute its current price. Is this a discount or premium
bond?
(b) Assume the bond in (a) pays its coupon semiannually. Using
the other information in (a), compute its price.
(c) Common shares of Janti ltd. will grow at 16.1% for three
years. The growth rate will decrease to 13.3% for two years after
that. The growth rate will later drop to 9.5% and remain constant
thereafter. The company just paid a dividend of GH¢ 0.41. If the
cost of equity is 11.1%, compute its price.
(d). A company sells preference shares to raise GH¢ 1.5
million. Each share pays a dividend of GH¢ 1.25. The market
interest rate is 7.9 percent.
i. What should be the price per preference share?
ii. How many shares should be sold to raise the raise GH¢ 1.5
million?
Solutions
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QUESTION:
a) If a coupon bond of 19 years that pays an 9.7% coupon, has
a face value of GH¢ 1,000 and the prevailing discount rate is
13.6%, compute its current price. Is this a discount or premium
bond?
(b) Assume the bond in (a) pays its coupon semiannually. Using
the other information in (a), compute its price.
(c) Common shares of Janti ltd. will grow at 16.1% for three
years. The growth rate will decrease to 13.3% for two...
QUESTION 1: (a) If a coupon bond of 15 years pays an 10.7%
coupon and the prevailing discount rate is 9.6%, compute its
current price. Is this a discount or premium bond? b) Assume the
bond in (a) is a semi-annual coupon bond. Using the other
information in (a), compute its price. c) Common shares of Linux
Ltd. will grow at 13.21% for three years and 9.3% for another two
years. The growth rate will eventually drop to 7.5% and...
A bond matures in 15 years and pays an 8 percent annual coupon.
The bond has a face value of $1,000 and currently sells for $985.
What is the bond’s current yield and yield to maturity?
The face value for WICB Limited bonds is $250,000 and has a 6
percent annual coupon. The 6 percent annual coupon bonds matures in
2035, and it is now 2020. Interest on these bonds is paid annually
on December 31 of each year, and...
A bond matures in 15 years and pays an 8 percent annual coupon.
The bond has a face value of $1,000 and currently sells for $985.
What is the bond’s current yield and yield to maturity?
A bond matures in 15 years and pays an 8 percent annual coupon.
The bond has a face value of $1,000 and currently sells for $985.
What is the bond’s current yield and yield to maturity? $
A bond matures in 20 years and pays an 8 percent annual coupon.
The bond has a face value of $1000 and currently sells for $900.
What is the bond's current yield and yield to maturity?
Bond J is a 3.7% coupon bond. Bond K is a 9.7% coupon bond. Both
bonds have 15 years to maturity, make semiannual payments and have
a YTM of 6.7%.
If interest rates suddenly rise by 2%, what is the percentage
price change of these bonds?
Percentage change in price of Bond J
%
Percentage change in price of Bond K
%
What if rates suddenly fall by 2% instead?
Percentage change in price of Bond J
%
Percentage change...
A bond has par=$1000, coupon rate of 3% and matures in 4 years.
The bond pays semi-annual coupons. On the market, you see that the
current YTM is 9%, however, a trader told you that his expected
yield on the bond is only 3.6%. What default probability on the par
is the trader's expectation consistent with? (Provide your answer
as percent rounded to two decimals, omitting the % sign.)