Question

In: Finance

a. You have the following instruments; pleas calculate the PV of the following bonds (with face...

a. You have the following instruments; pleas calculate the PV of the following bonds (with face value 1,000 €):

• 4% annual coupon bond, 2-year maturity, current market yield is 3.47%

• 4.5% annual coupon bond, 3-year maturity, current market yield is 3.6%

• 5% annual coupon bond, 5-year maturity, current market yield is 4%

b. Some years ago, you bought a 5% annual coupon bond with a face value of €1000 that had a YTM of 6% and 10 years left until maturity at that time. Suddenly you are forced to sell the bond today at the market price of €908. What is your capital gain/loss?

Expert Solution

a. Calculation of PV of various bonds :

i) bond with 2 year maturity :

ii) bond with 3 year maturity :

iii) bond with 5 year maturity :

b. Calculation of Capital gain / loss :

i) Purchase price of the bond :

Capital loss on sale of the bond = 926.40-908 = Euro 18.4

NOTE : In all the cases it is assumed that the bobds will be redeemed at par value.

jeff jeffy answered 1 year ago

Which of the following is true of bonds? a Since bonds have a face value of...

Which of the following is true of bonds? a Since bonds have a face value of $1,000, they can be purchased at any time for $1,000. b Once purchased, bonds cannot be sold and must be held until maturity. c Investors in bonds are part owners of the corporation that issued the bonds. d For the corporation that issues bonds, bonds are a way to fund its assets.

suppose that you have the following bonds: 1-year ZCB, face value 1, priced at 0.98 2...

suppose that you have the following bonds: 1-year ZCB, face value 1, priced at 0.98 2 year ZCB, face value 1, priced at 0.95 3-year ZCB, face value 1, priced at 0.92 4-year ZCB, face value 1, priced at 0.88 A life insurance company anticipates the following payments: $100 in one year, $250 in two years, $300 in three years, and $350 in four years.. What answer is closest to the total present value of the life insurance company’s anticipated...

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. Two years after the bonds were issued, the going rate of interest on bonds such...

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...

You have bought 100 bonds with a face value of $1,000, an annual coupon rate of...

You have bought 100 bonds with a face value of $1,000, an annual coupon rate of 6 percent, a yield to maturity of 8 percent, and 10 years to maturity. Now you are concerned that rates will rise and the bond value will, therefore, drop. You want to take a short (sell) position on another bond with face value of $1,000, an annual coupon rate of 5 percent and a yield to maturity of 7 percent, and 8 years to...

RKO Company sold bonds with a face value of $750,000 for $806,000. The bonds have a...

RKO Company sold bonds with a face value of $750,000 for $806,000. The bonds have a coupon rate of 7 percent, mature in 10 years, and pay interest annually every December 31. All of the bonds were sold on January 1 of this year. Record the sale of the bonds on January 1 and the payment of interest on December 31 of this year, without the use of a premium account. RKO uses the effective-interest amortization method. Assume an annual...

Bonds: The company issued 80,000 bonds. The bonds have a $1,000 face value with 7.5% coupons...

Bonds: The company issued 80,000 bonds. The bonds have a $1,000 face value with 7.5% coupons with annual payments, 7 years to maturity, and currently sell for $925. The marginal tax rate is 12%. Common Stock: The company has 500,000 shares of common stock outstanding, selling for $41 per share. The company’s beta is 1.25, the risk free rate is 2%, and the market risk premium is 9%. Preferred Stock: The company issued 100,000 shares of preferred stock. Preferred stock...

Calculate the PV CCA Tax Shield for the following asset. A machine that has a 10...

Calculate the PV CCA Tax Shield for the following asset. A machine that has a 10 year useful life and a purchase price of 100,000. The CCA rate on the machine is 30% and the company is operating in a 35% tax bracket. Your company typically uses a 12% discount rate on all of its potential investments. At the end of its useful life, the machine will have a salvage value of $0.00.

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.

No need to explain pleas only answer. thank you _____40. All of the following are considered...

No need to explain pleas only answer. thank you _____40. All of the following are considered in classifying viruses except its A. nucleic acid composition B. capsid architecture C. ability to grow in embryonated eggs D. replication strategy _____41. Which one of the following does not occur in the lysogenic life cycle of bacteriophage provided the virus remains temperate? A. phage insertion B. penetration C. cell lysis D. attachment _____42. Which one of the following viruses...