Goody's bonds pay a 8 percent annual coupon rate. The bonds mature in 13 years. The...

Goody's bonds pay a 8 percent annual coupon rate. The bonds mature in 13 years. The bond pays interest semiannually. What is the price per bond if the face value is $1,000 and the yield to maturity is 10 percent? (Round your answer to two decimal places. Do not enter dollar signs.)

Solutions

Expert Solution

Calculation of Price of Bond (B₀):

We know that,

[Where,

B₀ = Price of Bond Today

I = Interest

R = Disount rate OR Yield to maturity

n = Number Of Periods

MV= Maturity Value i.e Face Value of Bond**]\

**Since no addtional Information is given on maturity Value, We will ALWAYS assume that Bond Matures at PAR.

Now,

IN CASE OF SEMI-ANNUAL COMPOUNDING : Following THREE things are required:

Therefore,

(by using calculator)

PVAF (0.05, 26 periods) = Present Value Annuity Factor (0.05, 26 periods) = 14.37519

PVF (0.05, 26^th period) = Present Value Factor (0.05, 26^th period) = 0.28124

Therfore, Price of Bond = 856.25

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Schumacher Homes has 8 percent bonds outstanding that mature in 13 years. The bonds pay interest...

Schumacher Homes has 8 percent bonds outstanding that mature in 13 years. The bonds pay interest semiannually. These bonds have a par value of $1,000 and are callable in 2 years at a premium of $75. What is the yield to call if the current price is equal to 103.25 percent of par? 9.66 percent 7.75 percent 8.98 percent 8.06 percent

ABC's bonds will be maturing in 8 years, pay 8 percent coupon rate on the $1,000...

ABC's bonds will be maturing in 8 years, pay 8 percent coupon rate on the $1,000 par value. a. The value of the bond is $________, if the coupon is paid semiannually. (Round to the nearest cent.) b. The value of the bond is $________, if the coupon is paid annually.

Sheridan, Inc., has outstanding bonds that will mature in six years and pay an 8 percent...

Sheridan, Inc., has outstanding bonds that will mature in six years and pay an 8 percent coupon semiannually. If you paid $1,093.30 today and your required rate of return was 5.5 percent. How much should you have paid for the bond? Did you pay the right price for the bond?

Vulcan, Inc., has 8 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual pay...

Vulcan, Inc., has 8 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments and have a par value of $1,000. If the YTM on these bonds is 10 percent, what is the current bond price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

A $1,000 par value bond with an annual 8% coupon rate will mature in 10 years....

A $1,000 par value bond with an annual 8% coupon rate will mature in 10 years. Coupon payments are made semi-annually. What is the market price of the bond if the required market rate is 6%? (See Appendix G.)

1- Abner Corporation's bonds mature in 19 years and pay 8 percent interest annually. If you...

1- Abner Corporation's bonds mature in 19 years and pay 8 percent interest annually. If you purchase the bonds for $1,075, what is your yield to maturity? Your yield to maturity on the Abner bonds is _%. (Round to two decimal places.) 2- The Saleemi Corporation's $1,000 bonds pay 9 percent interest annually and have 11 years until maturity. You can purchase the bond for $955. a.What is the yield to maturity on this bond? b.Should you purchase the bond...

ABC Co. issued 1 million 6 percent annual coupon bonds that mature in 10 years. The...

ABC Co. issued 1 million 6 percent annual coupon bonds that mature in 10 years. The face value is $1,000 per bond. What are the expected cash flows from one of these bonds?

Hamilton, Inc. bonds have a coupon rate of 15 percent. The interest is paid semiannually, and the bonds mature in 14 years.

Hamilton, Inc. bonds have a coupon rate of 15 percent. The interest is paid semiannually, and the bonds mature in 14 years. Their par value is $1,000. If your required rate of return is 14 percent, what is the value of the bond? What is the value if the interest is paid annually?

Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an...

Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an annual coupon rate of 12%. Interest payments are made semi-annually. The current market rate for similar bonds is 10%. The bonds sell for $1,330,053. Create a table showing the amortized or discount for the first two years of the bonds.

Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an...

Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an annual coupon rate of 12%. Interest payments are made semi-annually. The current market rate for similar bonds is 10%. The bonds sell for $1,330,053. a. Show the journal entries for the bond issuance, first interest payment, and bond retirement at maturity Waveland Corporation issued a $1,200,000 in bonds which mature in 8 years. The bonds pay an annual coupon rate of 12%. Interest payments...

Subjects