Question

In: Finance

Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of...

Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,100 every six months over the subsequent eight years, and finally pays $1,400 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 6 percent compounded semiannually.

What is the current price of bond M and bond N?

Solutions

Expert Solution

Rate semiannual =6%/2 =3%
Price of Bond M =PV of Coupons of 1100 +PV of Coupons of 1400 + PV of Par Value
=1100*((1-(1+3%)^-16)/(3%*(1+3%)^12)+1400*(((1-(1+3%)^-12)/(3%*(1+3%)^28)+20000/(1+3%)^40 =21913.18

Price of Bond N =20000/(1+3%)^40 =6131.14


Related Solutions

Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of...
Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of $30,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $3,100 every six months over the subsequent eight years, and finally pays $3,400 every six months over the last six years. Bond N also has a face value of $30,000 and a maturity of 20 years; it makes no coupon payments over the life of the...
The change corporation has two different bonds currently outstanding. Bond M has a face value of...
The change corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $3000 every six months over the subsequent eight years, and finally pays $3,300 every six months over the last 6 years. bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coipon payments over the life of the...
The Change Corporation has two different bonds currently outstanding. Bond M has a face value of...
The Change Corporation has two different bonds currently outstanding. Bond M has a face value of $40,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,000 every six months over the subsequent eight years, and finally pays $2,300 every six months over the last six years. Bond N also has a face value of $40,000 and a maturity of 20 years; it makes no coupon payments over the life of the...
The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of...
The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,800 every six months over the subsequent eight years, and finally pays $2,100 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the...
The Change Corporation has two different bonds currently outstanding. Bond M has a face value of...
The Change Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,300 every six months over the subsequent eight years, and finally pays $2,600 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the...
The Morgan corporation has two different bonds currently outstanding. Bond M has a face value of...
The Morgan corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 15 years. The bond makes no payments for the first 5 years, then pays $600 every six months over the subsequent six years, and finally pays $1,000 every six months over the last four years. Bond N also has a face value of $20,000 and a maturity of 15 years, it makes no coupon payments over the life of the...
The Frush Corporation has two different bonds currently outstanding. Bond M has a face value of...
The Frush Corporation has two different bonds currently outstanding. Bond M has a face value of $30,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,900 every six months over the subsequent eight years, and finally pays $2,200 every six months over the last six years. Bond N also has a face value of $30,000 and a maturity of 20 years; it makes no coupon payments over the life of the...
The Frush Corporation has two different bonds currently outstanding. Bond M has a face value of...
The Frush Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,300 every six months over the subsequent eight years, and finally pays $2,600 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the...
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000...
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures In 20 years. The bond makes no payments for the first six years, then pays $1,300 every six months over the subsequent eight years, and finally pays $1.600 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years. It makes no coupon payments over the life of the bond....
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000...
Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $900 every six months over the subsequent eight years, and finally pays $1,300 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT