Question

In: Finance

Five years ago, the City of Baltimore sold at par a $1,000 bond with a coupon...

Five years ago, the City of Baltimore sold at par a $1,000 bond with a coupon rate of 8 percent and 20 years to maturity. If this bond pays interest annually, what is the value of this bond to an investor who requires an 8 percent rate of return?

  • A. $607.72
  • B. $692.00
  • C. $1,000
  • D. cannot be determined from the information given
  • What is the value of an Orion bond that has a 10 percent coupon, pays interest annually, and has 10 years to maturity, if the required rate of return is 12 percent?
  • A. $1,200
  • B. $885.50
  • C. $895.27
  • D. $735.26

What is the market value of a $1,000 zero-coupon bond with 5 years to maturity. The market rate today is 9 percent.

  • A. $593
  • B. $650
  • C. $621
  • D. $495

Solutions

Expert Solution


Related Solutions

A $1,000 par value bond was issued five years ago at a coupon rate of 8...
A $1,000 par value bond was issued five years ago at a coupon rate of 8 percent. It currently has 15 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer...
23 A $1,000 par value bond was issued five years ago at a coupon rate of...
23 A $1,000 par value bond was issued five years ago at a coupon rate of 12 percent. It currently has 25 years remaining to maturity. Interest rates on similar debt obligations are now 14 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your...
A $1,000 par value bond was issued five years ago at a coupon rate of 8...
A $1,000 par value bond was issued five years ago at a coupon rate of 8 percent. It currently has 10 years remaining to maturity. Interest rates on similar debt obligations are now 10 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer...
A $1,000 par value bond was issued five years ago at a coupon rate of 6...
A $1,000 par value bond was issued five years ago at a coupon rate of 6 percent. It currently has 8 years remaining to maturity. Interest rates on similar debt obligations are now 8 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer...
Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate.
Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually.a. If the going interest rate has risen to 10 percent, at what price would the bonds be selling today?b. Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of Cisco’s bonds over time?
A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate....
A $1,000 par value bond was issued 25 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interest rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,040. Further assume Ms. Bright paid 20 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to...
3 years ago, you paid $1011 for a $1,000 par bond that has a 5% coupon...
3 years ago, you paid $1011 for a $1,000 par bond that has a 5% coupon with semiannual payments. You are selling it today for $998. You reinvested coupons at the 3.6% annual rate. What is your total return? (Report your answer to the nearest 0.01%, without the % symbol. E.g., if your answer is 5.1537%, enter it as 5.15.) (show work)
A $1,000 par value bond was issued 30 years ago at a 12 percent coupon rate....
A $1,000 par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,090. Further assume Ms. Bright paid 40 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to...
A 10 percent coupon bond was issued 2 years ago and sold at par value. Now,...
A 10 percent coupon bond was issued 2 years ago and sold at par value. Now, the required return on the same bond is 8 percent. What is the coupon rate today?
Several years ago, the ABC Company sold a $1,000 par value bond that now has 20...
Several years ago, the ABC Company sold a $1,000 par value bond that now has 20 years to maturity and a 8.00% annual coupon that is paid semiannually. The bond currently sells for $925 and the company’s tax rate is 30%. What is the after-tax cost of debt? Group of answer choices
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT