Company Triple A semi-annual bonds currently sell for $1,055. They have a 5.50% coupon rate and...

Company Triple A semi-annual bonds currently sell for $1,055. They have a 5.50% coupon rate and a 25-year maturity and are callable in 6 years at $1,100.00. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds, the YTC or the YTM and why? Is this a discount or premium bond and why?

Expert Solution

jeff jeffy answered 1 year ago

7. Company Triple A semi-annual par value bonds currently sell for $1,055. They have a 5.50%...

7. Company Triple A semi-annual par value bonds currently sell for $1,055. They have a 5.50% coupon rate and a 25-year maturity and are callable in 6 years at 8% premium. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of returns should an investor...

AEP's bonds currently sell for $955. They have a 7.21% annual coupon rate and a 30-year...

AEP's bonds currently sell for $955. They have a 7.21% annual coupon rate and a 30-year maturity. What rate of return should an investor expect to earn if he or she purchases these bonds? Group of answer choices 7.59% 13.00% 10.07% 8.75% 9.14%

Gilligan Co.'s bonds currently sell for $1,010. They have a 6.75% annual coupon rate and a...

Gilligan Co.'s bonds currently sell for $1,010. They have a 6.75% annual coupon rate and a 15-year maturity, and are callable in 6 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he...

A corporation’s bonds currently sell for $1,200. The bonds have a 5-year maturity, an annual coupon...

A corporation’s bonds currently sell for $1,200. The bonds have a 5-year maturity, an annual coupon of $90, and a par value of $1,000. What is the current yield of these bonds (to two decimal places, e.g., 5.10%)? A corporation’s non-callable bonds currently sell for $1,150. The bonds have a 15-year maturity, a 6% annual coupon paid annually, and a par value of $1,000. What is the yield to maturity of these bonds (to two decimal places, e.g., 5.10%)? A...

ABC's bond currently sell for $900. If the coupon rate is 8% and the bonds have...

ABC's bond currently sell for $900. If the coupon rate is 8% and the bonds have 11 years to maturity, what is the yield to maturity? Assume that the par value is $1,000 and coupon payments are semi-annual.

A company has 300,000 bonds outstanding that make semi-annual coupon payments currently trading at $1,010, with...

A company has 300,000 bonds outstanding that make semi-annual coupon payments currently trading at $1,010, with a 8% coupon rate and 15 years to maturity. In addition, the company has a current stock price of $54, five million shares outstanding, a 35% tax rate, a beta of 0.85, a risk-free rate of 2%, and an expected market return of 9%. What is the weighted average cost of capital (WACC)?

A company issued the following semi-annual bonds: Face amount: $80,000 Coupon rate: 8% ...

A company issued the following semi-annual bonds: Face amount: $80,000 Coupon rate: 8% Yield: 6% Life: 20 years a. Compute the selling price of the bonds. Prepare the journal entry for the issuance of the bonds using the selling price from part (a). c. Prepare the amortization schedule for only the first two interest periods using the interest method. CASH INTEREST EXPENSE AMORTIZATION BOOK VALUE d. Prepare the journal entry to record the first...

Amir Enterprises’ non-callable semiannual coupon bonds currently sell for $1,150. They have a 20-yearmaturity, an annual coupon...

Amir Enterprises’ non-callable semiannual coupon bonds currently sell for $1,150. They have a 20-yearmaturity, an annual coupon of $100, and a par value of $1,000. What is their yield to maturity (annual)? Show work.

Hope bonds have a coupon rate of 7% and mature in 7 years. Assuming semi-annual coupons...

Hope bonds have a coupon rate of 7% and mature in 7 years. Assuming semi-annual coupons with face value of $100, what is the value of this bond? Similar bonds yield 6%. a. The value of this bond is $39.54. b. The value of this bond is $106.58. c. The value of this bond is $105.65. d. The value of this bond is $94.54. Dewyco has preference stock trading at $50 per share. The next preference dividend of $4 is...

McCue Inc.’s bonds currently sell for $1,070. They pay a $120 annual coupon, have a 11-year...

McCue Inc.’s bonds currently sell for $1,070. They pay a $120 annual coupon, have a 11-year maturity and a $1,000 par value, but they can be called in 4 years at $1,080. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels into the future. What is the difference between this bond’s YTM and its...

Question