In: Finance

Doisneau 16-year bonds have an annual coupon interest of 12 percent, make interest payments on a semiannual basis, and have a $1,000 par value. If the bonds are trading with amarket's required yield to maturity of 13 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds?

Doisneau bonds are discount bonds as the coupon rate of 12 % is lower than prevailing interest rate of 13 %.

When a bond sells at a price lower than its par value, is known as discount bond. Market interest rate and bond price are inversely related with each other. If market rate increases, bond price decreases and vice-versa. The bond which offers a lower coupon rate than current market rate, is selling at lower price than its face value.

Let’s compute the price of the bonds.

Price of bond = C x [1-{1/ (1+r) ^{n}}/r] +M/ (1+r)
^{n}

M = Face Value = $ 1,000

C = Coupon amount = Face value x coupon rate/ coupon frequency in a year

= $ 1,000 x 0.12/2 = $ 1,000 x 0.06 = $ 60

n = No of periods = 16 years x 2 = 32

r = Rate of interest = 13 % p.a. or 0.13/2 = 0.065 semiannually

Price bond = $ 60 x [1-{1/ (1+0.065)^{32}}/0.065 ] + $
1,000/ (1+0.065)^{32}

= $ 60 x [1-{1/ (1.065)^{32}}/0.065 ] + $ 1,000/
(1.065)^{32}

= $ 60 x [1-(1/ 7.50217946127498)/0.065] + $ 1,000/ 7.50217946127498

= $ 60 x [(1- 0.133294598611222)/0.065] + $ 133.294598611222

= $ 60 x [(0.866705401388778/0.065)] + $ 133.294598611222

= $ 60 x 13.3339292521351 + $ 133.294598611222

= $ 800.035755128103 + $ 133.294598611222

= $ 933.330353739325 or **$ 933.33**

Price of bonds is $ 933.33 and the bonds are discount bonds selling at a lower price than its par value.

Doisneau 15-year bonds have an annual coupon interest of 12
percent, make interest payments on a semiannual basis, and have a
$1000 par value. If the bonds are trading with a market's
required yield to maturity of 13 percent, are these premium or
discount bonds? Explain your answer. What is the price of the
bonds? (round to the nearest cent)

Doisneau 16-year bonds have an annual coupon interest of
9percent, make interest payments on a semiannual basis, and have
a$1,000par value. If the bonds are trading with a market's required
yield to maturity of 11percent, are these premium or discount
bonds? Explain your answer. What is the price of the bonds

(Bond Valuation) Hamilton, Inc. bonds have a coupon rate of 12
percent. The interest is paid semiannually, and the bonds mature in
14 years. Their par value is $1,000. If your required rate of
return is 9 percent, what is the value of the bond? What is the
value if the interest is paid annually?
a. If the interest is paid semiannually, the value of the bond
is $_____

Enterprise, Inc. bonds have an annual coupon rate of 14 percent.
The interest is paid semiannually and the bonds mature in 14 years.
Their par value is $1,000. If the market's required yield to
maturity on a comparable-risk bond is 9 percent, what is the
value of the bond? What is its value if the interest is paid
annually?
A. The value of the Enterprise bonds if the interest is paid
semiannually is..

Enterprise,Inc. bonds have an annual coupon rate of13 percent.
The interest is paid semiannually and the bonds mature in7years.
Their par value is$1000If the market's required yield to maturity
on a comparable-risk bond is 15percent, what is the value of the
bond? What is its value if the interest is paid annually?a. The
value of the Enterprise bonds if the interest is paid semiannually
is
$?
(Round to the nearest cent.)

Consider a 4-year bond with 12 percent semi-annual coupon
payments and currently priced to yield 10 per cent per annum.
Calculate duration of the bond.

Consider a 3-year bond with 14 percent semi-annual coupon
payments and currently priced to yield 12 per cent per annum.
Calculate duration of the bond.
What is the percentage of price change if interest rate
increases to 12.15% per annum?

Consider a 3-year bond with 14 percent semi-annual coupon
payments and currently priced to yield 12 per cent per annum.
Calculate duration of the bond.
What is the percentage of price change if interest rate
increases to 12.15% per annum?

S07-25 Finding the Bond Maturity (LO2) Excey Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.2 percent. The current yield on these bonds is 7.55 percent. How many years do these bonds have left until they mature? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maturity of bond = _______ years

Laurel, Inc., and Hardy Corp. both have 8 percent coupon bonds
outstanding, with semiannual interest payments, and both are
currently priced at the par value of $1,000. The Laurel, Inc., bond
has six years to maturity, whereas the Hardy Corp. bond has 15
years to maturity. If interest rates suddenly rise by 2 percent,
what is the percentage change in the price of each bond? (Do not
round intermediate calculations. A negative answer should be
indicated by a minus sign....

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