Computation of bond value and total value of the

Assignment Help Financial Accounting

Reference no: EM13356336

Computation of bond value and total value of the portfolio.

1. An investor must choose between two bonds:

Bond A pays $80 annual interest and has a market value of $800. It has 10 years to maturity.

Bone B pays $85 annual interest and has a market value of $900. It has two years to maturity.

a. Compute the current yield on both bonds.

b. Which bond should he select based on your answer to part a?

c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.36 percent. What is the approximate yield to maturity on Bond B?

d. Has your answer changed between parts b and c of this question in terms of which bond to select?

2. The Florida Investment Fund buys 90 bonds of the Gator Corporation through a broker. The bonds pay 8 percent annual interest. The yield to maturity (market rate of interest) is 10 percent. The bonds have a 25-year maturity.

Using an assumption of semiannual interest payments:

a. Compute the price of a bond (refer to \"Semiannual interest and bond prices\" in Chapter 10 for review if necessary).

b. Compute the total value of the 90 bonds.

Reference no: EM13356336

Questions Cloud

Reconciliation of master budget operating income flexible : reconciliation of master budget operating income flexible budget operating income and actual operating income.downes

Flexible budgeted income statement using variable : flexible budgeted income statement using variable costing.downes consolidated industries international uses a standard

Actual resultsdirect materials purchased 250000 lbs22 per : actual resultsdirect materials purchased 250000 lbs.22 per lb. direct materials used 240000 direct labor 150000 hrs

Master budgeted income statement using variable : master budgeted income statement using variable costing.downes consolidated industries international uses a standard

Computation of bond value and total value of the : computation of bond value and total value of the portfolio.1.nbspan investor must choose between two bondsbond a pays

Finding bond coupon rate current rate and yield to : finding bond coupon rate current rate and yield to maturity.1.nbspif the one million additional shares can only be

Calculation of market value of bond at various ratesassume : calculation of market value of bond at various rates.assume a government bond has a face value of 1000 a coupon of 6

Finding current yield yield to maturity and capital gain : finding current yield yield to maturity and capital gain yield of bond.ten years ago a pane in the glass inc. the major

Valuation of bond at applicable inflation rates and change : valuation of bond at applicable inflation rates and change in the risk free rates.a one-year-maturity u.s. treasury

User Account

All Pages