Question

In: Finance

Creative Financing Inc. is planing to issue a 15-year, $1,000 face value bond with a coupon...

Creative Financing Inc. is planing to issue a 15-year, $1,000 face value bond with a coupon rate that changes every five years.  The coupon rate for the first five years is 10%, 10.75% the next five years, and 11.5% for the remaining five years.  If the yield on this bond is 11%, how much would you be willing to pay for this bond?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Maschale Corp. wants to issue bonds with a zero coupon bond, a face value of $1,000,...
Maschale Corp. wants to issue bonds with a zero coupon bond, a face value of $1,000, and 12 years to maturity. Maschale estimates that the bonds will sell for $384. Maschale Corp. common stock currently sells for $30 per share. Maschale paid a dividend yesterday of $4.00 per share and expects the dividend to grow at a constant rate of 5% per year. Maschaleʹs capital structure is $4 million debt, $6 million common equity and $5 million preferred stock which...
Faber-Overdrive Autoparts issued at par value a 15-year 6% semiannual coupon bond, face value $1,000. At...
Faber-Overdrive Autoparts issued at par value a 15-year 6% semiannual coupon bond, face value $1,000. At the end of 2 years, the market yield increased to 7%. One year later, the market yield was 8%. If you purchased the bond at the end of Year 2 and sold it one year later, how much was your capital gain or loss?
Closter, Inc., has a bond issue with a face value of $1,000 that is coming due...
Closter, Inc., has a bond issue with a face value of $1,000 that is coming due in one year. The value of the company’s assets is currently $1,180. Ashok Vora, the CEO, believes that the assets in the company will be worth either $970 or $1,470 in a year. The going rate on one-year T-bills is 6 percent. a-1. What is the value of the company’s equity? a-2. What is the value of the debt? Suppose the company can reconfigure...
Bond A is a 10% coupon bond with a face value of $1,000 and a maturity...
Bond A is a 10% coupon bond with a face value of $1,000 and a maturity of 3 years. The discount rate (required return, or interest rate) is 8% now or in the future. A. What is the bond price now, in year 1, in year 2, and in year 3      (P0,P1,P2 and P3)? B. If you buy the bond now and hold it for one year, what is the      (expected) rate of return? C. If you buy...
Citigroup Inc. is going to issue a bond with face value of $100, coupon rate of...
Citigroup Inc. is going to issue a bond with face value of $100, coupon rate of 3.50%, semiannual coupon payments, maturity of 11 years, and a yield to maturity of 6.00% APR. This bond will allow Citigroup to not make coupon payments for the first 4 years (hence, no coupon payments until after year 4). What is this bond’s price? Group of answer choices $85.88 $60.50 $67.79 $80.08
BYL Inc. issued a 20-year floating rate bond with face value of $1,000. The coupon payments...
BYL Inc. issued a 20-year floating rate bond with face value of $1,000. The coupon payments of the floater are calculated based on the basis of the coupon formula of 180-day LIBOR+150 basis points. The floor and cap of the floater are 3.5 percent and 7 percent respectively. Compute the coupon rate and coupon payments for the floater under the following LIBOR rates: 1%, 1.50%. 2%, 2.25%, 3%, 4.75%, 5%, 5.25%, 5.50%, 5.75%, and 6%.
BYL Inc. issued a 20-year floating rate bond with face value of $1,000. The coupon payments...
BYL Inc. issued a 20-year floating rate bond with face value of $1,000. The coupon payments of the floater are calculated based on the basis of the coupon formula of 180-day LIBOR+150 basis points. The floor and cap of the floater are 3.5 percent and 7 percent respectively. Compute the coupon rate and coupon payments for the floater under the following LIBOR rates: 1%, 1.50%. 2%, 2.25%, 3%, 4.75%, 5%, 5.25%, 5.50%, 5.75%, and 6%. Morgan Stanley issued a range...
A 5-year bond with a face value of $1,000 pays a coupon of 4% per year...
A 5-year bond with a face value of $1,000 pays a coupon of 4% per year (2% of face value every six months). The reported yield to maturity is 3% per year (a six-month discount rate of 3/2 =1.5%). What is the present value of the bond?
A 5 year semiannual coupon bond with a face value of $1,000 trades at $938. The...
A 5 year semiannual coupon bond with a face value of $1,000 trades at $938. The market-determined discount rate is 9%. What is the coupon rate? Answer in percent and round to two decimal places.
Consider a 3 year bond with a face value is $1,000 and a 10% coupon rate...
Consider a 3 year bond with a face value is $1,000 and a 10% coupon rate a) If the current interest rate is 2%, what should be the price of the bond? b) If you could purchase the bond for $1,100, is the yield you are getting higher or lower than 2%? How can you tell? c) Assume you purchase the bond for $1,100 and hold if for one year. You collect one coupon payment and then sell the bond...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT