Question
In: Finance
Endeavor Inc. is contemplating issuing a 30-year bond with a coupon rate of 7.17% (annual coupon...
Endeavor Inc. is contemplating issuing a 30-year bond with a coupon rate of 7.17% (annual coupon payments) and a face value of $1,000. Endeavor Inc. believes it can get a rating of A from Standard & Poor's. However, due to recent financial difficulties at the company, Standard & Poor's is warning that it may downgrade Endeavor's bonds to BBB. Yields on A-rated, long-term bonds are currently 6.46%, and yields on BBB-rated bonds are 6.79%.
a. What is the price of the bond if Endeavor Inc. maintains the A rating for the bond issue?
b. What will be the price of the bond if it is downgraded?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Endeavor Inc. is contemplating issuing a 3030-year bond with a coupon rate of 7.15 %7.15% (annual...
Endeavor Inc. is contemplating issuing a
3030-year
bond with a coupon rate of
7.15 %7.15%
(annual coupon payments) and a face value of
$ 1 comma 000$1,000.
Endeavor Inc. believes it can get a rating of A from Standard
& Poor's. However, due to recent financial difficulties at
the company, Standard & Poor's is warning that it may
downgrade Endeavor's bonds to BBB. Yields on A-rated, long-term
bonds are currently 6.47%, and yields on BBB-rated bonds are
6.77%.
a. What...
Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 5.79 %(annual coupon...
Andrew Industries is contemplating issuing a 30-year bond with
a coupon rate of 5.79 %(annual coupon payments) and a face value
of $1,000. Andrew believes it can get a rating of A from Standard
and Poor's. However, due to recent financial difficulties at the
company, Standard and Poor's is warning that it may downgrade
Andrew Industries bonds to BBB. Yields on A-rated long-term bonds
are currently 5.29 % and yields on BBB-rated bonds are 5.69 %
a. What is the...
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a coupon rate of 7.50% (annual coupon payments) and a face value of
$1,000. Andrew believes it can get a rating of A from Standard
Poor's. However, due to recent financial difficulties at the
company, Standard and Poor's is warning that it may downgrade
Andrew Industries bonds to BBB. Yields on A-rated long-term bonds
are currently 7.00%, and yields on BBB-rated bonds are 7.40%.
(a) What is the price of...
Andrew Industries is contemplating issuing a30-yearbond with a coupon rate of7.09%(annual coupon...
Andrew Industries is contemplating issuing a30-yearbond with a coupon rate of7.09%(annual coupon payments) and a face value of$1,000.Andrew believes it can get a rating of A from Standard &
Poor's. However, due to recent financial difficulties at the
company, Standard & Poor's is warning that it may downgrade
Andrew Industries' bonds to BBB. Yields on A-rated, long-term
bonds are currently6.49%,and yields on BBB-rated bonds are6.87%.a. What is the price of the bond if Andrew Industries maintains
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A bond investor is analyzing the following annual coupon bonds: Issuing Company Annual Coupon Rate Smith...
A bond investor is analyzing the following annual coupon
bonds:
Issuing Company
Annual Coupon Rate
Smith Corporation
6%
Irwin Incorporated
12%
Johnson, LLC
9%
Each bond has 10 years until maturity and the same level of
risk. Their yield to maturity (YTM) is 9%. Interest rates are
assumed to remain constant over the next 10 years.
Using the previous information, correctly match each curve on
the graph to it’s corresponding issuing company. (Hint: Each curve
indicates the path that...
1. Calculate the price of a 30-year annual coupon-ed bond with a coupon rate of 5%,...
1.
Calculate the price of a 30-year annual coupon-ed bond with a
coupon rate of 5%, a market rate of 7%, and a face value of
$1000.
n
i
PV
PMT
FV
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put answer here
2019 Spring2
2.
Calculate the price of a 30-year semiannual coupon-ed bond with a
coupon rate of 5%, a market rate of 7%, and a face value of
$1000....
A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has a...
A 30-year maturity bond making annual coupon payments with a
coupon rate of 12% has a duration of 11 years and convexity of 100.
The bond currently sells at a yield to maturity of 8%. The actual
price of the bond as a function of yield to maturity is:
Yield to
maturity Price
7%
$1,620.45
8%
$1,450.31
9%
$1,308.21
What prices for the bond would be predicted by the duration
rule if the yield falls to 7%? What is the percentage...
A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has Macaulay’s...
A 30-year maturity bond making annual coupon payments with a
coupon rate of 12% has Macaulay’s duration of 11.54 years and
convexity of 192.4. The bond currently sells at a yield to maturity
of 8%.
a) What price would be predicted by the duration rule? You
assume that yield to maturity falls to 7%.
b) What price would be predicted by the duration-with-convexity
rule?
c) What is the percent error for each rule? What do you conclude
about the accuracy...
A 30-year maturity bond making annual coupon payments with a coupon rate of 12% has duration...
A 30-year maturity bond making annual coupon payments with a
coupon rate of 12% has duration of 11.54 years and convexity of
190.8. The bond currently sells at a yield to maturity of 8%.
Required:
(a)
Find the price of the bond if its yield to maturity falls to 7%
or rises to 9%. (Round your answers to 2 decimal places.
Omit the "$" sign in your response.)
Yield to maturity of 7%
$
Yield to maturity of 9%
$ ...
A 30-year maturity bond making annual coupon payments with a coupon rate of 15.0% has duration...
A 30-year maturity bond making annual coupon payments with a
coupon rate of 15.0% has duration of 9.41 years and convexity of
129.3. The bond currently sells at a yield to maturity of
11%.
a. Find the price of the bond if its yield to
maturity falls to 10%. (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Price of the bond
$
b. What price would be predicted by the duration
rule? (Do not round intermediate...
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