At what price will your bond be sold

Reference no: EM13303537

Two years ago your corporate treasurer purchased for the firm a 20-year bond at its par value of $1,000. The coupon rate on this security is 8 percent. Interest payments are made to bondholders once a year. Currently, bonds of this particular risk class are yielding investors 9 percent. A cash shortage has forced you to instruct your treasurer to liquidate the bond.

a.) At what price will your bond be sold? Assume annual compounding.
b.) What will be the amount of your gain or loss over the original purchase price?
c.) What would be the amount of your gain or loss had the treasurer originally purchased a bond with a 4-year rather than a 20-year maturity? (Assume all characteristics of the bonds are identical except their maturity periods.)
d.) What do we call this type of risk assumed by your corporate treasurer?

Reference no: EM13303537

Questions Cloud

What will net increase or decrease in the annual flotation : The amortization of flotation costs reduces taxes, and thus provides an annual cash flow. What will the net increase or decrease in the annual flotation cost tax savings be if refunding takes place?

What is the equilibrium concentration of elemental mercury : Biota can uptake and bioconcentrate compounds through vapor phase absorption. For example, leaves exposed to elemental mercury vapors will absorb the mercury into the aqueous phase and the lipid phases of the leaves. Kow for mercury = 4.17.

Describe the value chain of the gap inc main products : Describe the factors that impact the supply of the GAP Inc main products/services.Describe the value chain of the GAP Inc main products/services.

What mass of gac filters will be required to reach the limit : If 500 mL of benzene is spilled in a sealed room (64m^3), and it completely evaporates, what mass of GAC filters (Cmax = 80 mg benzene/1 g GAC) will be required to reach the permissible exposure limit for benzene

At what price will your bond be sold : What would be the amount of your gain or loss had the treasurer originally purchased a bond with a 4-year rather than a 20-year maturity? (Assume all characteristics of the bonds are identical except their maturity periods.)

How much charge does the rod have : A 2.30-gram air inflated balloon is given an excess negative charge, q1 = -3.50 × 10-8 C, by rubbing it with a blanket. How much charge, q2, does the rod have

Show how kh and kow can be used to describe koa : Show how Kh, and Kow can be used to describe Koa. You must show how the concentration units for all equilibrium distribution ratios either cancel or remain to give the final value for Koa. Octonal-air partitioning coefficient (Koa = C(octanol)/C(a..

Find the density of the material from which penny is made : A penny has a mass of 2.50 g, a diameter of 19.55 mm, find the density of the material from which the penny is made

Microsoft project and openproj. : Microsoft Project and OpenProj.

User Account

All Pages