Question

In: Finance

FIN300 Ltd.'s outstanding bvonds have a $1,000 par value, and they mature in 20 years. Their...

FIN300 Ltd.'s outstanding bvonds have a $1,000 par value, and they mature in 20 years. Their nominal yield to maturity is 9.00%, they pay interest semiannually, and they sell at a price of $985. What is the bond's nominal coupon interest rate?

Expert Solution

Information provided:

Face value= future value= $1,000

Time= 20 years*2= 40 semi-annual periods

Yield to maturity= 9%/2= 4.50%

Current price= present value= $985

The bond’s coupon rate is calculated by computing the amount of coupon payment.

Enter the below in a financial calculator to compute the amount of coupon payment:

FV= 1,000

PV= -985

N= 40

I/Y= 4.50

Press the CPT key and PMT to compute the amount of coupon payment.

The value obtained is 44.1849.

Therefore, the amount of annual coupon payment is $44.1849*2= $88.3697

Coupon rate is computed using the below formula:

Coupon rate= Annual coupon payment/ Par value of bond

= $88.3697/ $1,000

= 0.0884*100

= 8.84%.

In case of any query, kindly comment on the solution.

jeff jeffy answered 1 year ago

O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 20 years. Their...

O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 20 years. Their nominal yield to maturity is 8.75%, they pay interest semiannually, and they sell at a price of $875. What is the bond's nominal (annual) coupon interest rate? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their...

O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal annual, not semiannual yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $700. What is the bond's nominal coupon interest rate? 6.15% 6.58% 7.01% 5.72% 4.86%

1. O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years....

1. O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $875. What is the bond's coupon interest rate? 2. Stocks X just paid a dividend of $1 and a has a dividend growth rate of 10 percent. If the required rate of return is 20 percent, what is the value of the stock in one year? 3....

1. FIN3100’s outstanding bonds mature in 10 years, have a par value of $1,000, and make...

1. FIN3100’s outstanding bonds mature in 10 years, have a par value of $1,000, and make an annual coupon payment of $70. The market yield on the bond is currently 10%. What is the bond's price? B.) FIN3100 issued bonds with a 15-year maturity two year ago. The bonds have a 7% coupon, make one payment per year, and sold at their $1,000 par value. Market rate at the time was 7%. Now, two year later, the market rate has...

Question 1 XYZ's corporate bonds mature in 20 years, have a par value of $1,000, and...

Question 1 XYZ's corporate bonds mature in 20 years, have a par value of $1,000, and an annual coupon rate of 8% (paid on an annual basis). The market requires an interest rate of 7% (annual) on these bonds. What is the bond's price (report answer as a positive number)? $1,066.32 $1,118.01 $1,241.89 $1,105.94 None of the above. Question 2 A corporate bond has a maturity of ten years, face value of $1,000, and an annual coupon rate of 6.75%....

XYZ Corp.’s outstanding bonds have a $5,000 par value and they mature in 5 years. Their...

XYZ Corp.’s outstanding bonds have a $5,000 par value and they mature in 5 years. Their yield-to-maturity is 8%, annual coupon rate is 6%, and semi-annual compounding. (a) What's the bond's current market price? (b) What is the bond’s current yield? (c) If the Yield-to-maturity is 4%, what's the bond's current market price? please write the answer and how you worked it out on here instead of paper (d) If the Yield-to-maturity is 4%, what is the bond’s current yield?

A firm’s outstanding bonds have a $1,000 par value, are investment grade and mature in 6...

A firm’s outstanding bonds have a $1,000 par value, are investment grade and mature in 6 years. These bonds pay interest semiannually with a coupon of 8.0%. Assume that bond sells for $955.00. (a) What is the Yield-to-Maturity (YTM) bond? (b) What is the bond’s Current Yield? (c) What is the bond’s Capital Gains Yield? (d) Now, suppose the bond is trading at $1,150 and that the bond is callable in 2 years from now, at a call premium of...

A company's bonds will mature in 20 years and have a face value of $1,000, a...

A company's bonds will mature in 20 years and have a face value of $1,000, a 6.25% coupon rate paid semiannually. The price of the bonds is $1,100. The bonds are callable in 5 years at a call price of $1,090. What is their yield to maturity? What is their yield to call? What is the after-tax cost of debt on these bonds if they are not called and the tax rate is 25%?

Nesmith Corporation's outstanding bonds have a $1,000 par value, a 7% semiannual coupon, 20 years to...

Nesmith Corporation's outstanding bonds have a $1,000 par value, a 7% semiannual coupon, 20 years to maturity, and an 11% YTM. What is the bond's price? Round your answer to the nearest cent.

Nesmith Corporation's outstanding bonds have a $1,000 par value, an 11% semiannual coupon, 20 years to...

Nesmith Corporation's outstanding bonds have a $1,000 par value, an 11% semiannual coupon, 20 years to maturity, and a 15% YTM. What is the bond's price? Round your answer to the nearest cent.