Question

In: Finance

a. Heath Foods’s bonds have 10 years remaining to maturity. The bonds have a face value...

a. Heath Foods’s bonds have 10 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 9%. They pay interest annually and have a 10% coupon rate. What is their current yield?

b. Suppose Hillard Manufacturing sold an issue of bonds with a 12-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments.

  1. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 5%. At what price would the bonds sell?
  2. Suppose that 2 years after the initial offering, the going interest rate had risen to 11%. At what price would the bonds sell?
  3. Suppose that 2 years after the issue date (as in part a) interest rates fell to 5%. Suppose further that the interest rate remained at 5% for the next 10 years. What would happen to the price of the bonds over time?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

SOLVED WITH BA II PLUS CALCULATOR

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Heath Food Corporation’s bonds have 6 years remaining to maturity. The bonds have a face value...
Heath Food Corporation’s bonds have 6 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 11%. They pay interest annually and have a 6% coupon rate. What is their current yield? Round your answer to two decimal places.
a.Heath Foods’s bonds have 10 years remaining to maturity. The bonds have a face value of...
a.Heath Foods’s bonds have 10 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 9%. They pay interest annually and have a 10% coupon rate. What is their current yield? b.Suppose Hillard Manufacturing sold an issue of bonds with a 12-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. Two years after the bonds were issued, the going rate of interest on bonds such as these...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,057.09, and currently sell at a price of $1,108.89. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM:   % YTC:   % What return should investors expect to earn on these bonds? Investors would not expect the bonds to be called...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,061, and currently sell at a price of $1,115.28. a.What is their nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. % b.What is their nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places. % What return should investors expect to...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 5 years at $1,181.54, and currently sell at a price of $1,325.03. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM:   % YTC:   % What return should investors expect to earn on these bonds? Investors would expect the bonds to be called and...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 5 years at $1,184, and currently sell at a price of $1,332.41. What is their nominal yield to maturity? Round your answer to two decimal places. What is their nominal yield to call? Round your answer to two decimal places.
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,048.55, and currently sell at a price of $1,094.26. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM% = YTC%= What return should investors expect to earn on these bonds? Investors would not expect the bonds to be...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 5 years at $1,178.52, and currently sell at a price of $1,321.72. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % YTC: % What return should investors expect to earn on these bonds? Investors would expect the bonds to be...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,052.99, and currently sell at a price of $1,103.16. What is their nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.   % What is their nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.   % What return should investors expect to...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an...
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 5 years at $1,049, and currently sell at a price of $1,096.70. What is their nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places. % What is their nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places. % What return should investors expect to...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT