Compute the new price of the bond

Assignment Help Accounting Basics
Reference no: EM133063146

Question - The Vinny Cartier Company issued bonds at $1,000 per bond. The bonds had a 30-year life when issued, with semiannual payments at the then annual rate of 13 percent. This return was in line with required returns by bondholders at that point, as described below:

The real rate of return 2%

Inflation premium 6

Risk premium 5

Total return 13%.

Assume that ten years later the inflation premium is 2 percent, the risk premium has declined to 4 percent and both are appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity.

Required - Compute the new price of the bond.

Reference no: EM133063146

Questions Cloud

What is the current price of the bonds : The $1,000 par value bond with semiannual payments has 7 percent annual interest and has 13 years remaining to maturity. What is the current price of the bonds
Theory for main explanations of question : Discuss whether Expected Utility Theory has failed as a theory of rational choice? Are there good theoretical or practical reasons for continuing to use it?
What does situation in the eu and the uk : What does this situation in the EU and the UK (Brexit) mean for us here in the U.S. in terms of trade, travel, and global community? Elaborate.
Find all nash equilibrium of game : Consider a simple coordination game between two players. Player PP 1 and 2 simultaneously stick out one finger or two fingers on their hand.
Compute the new price of the bond : Question - The Vinny Cartier Company issued bonds at $1,000 per bond. Compute the new price of the bond
Explain crane brinton theory of a revolution : 1) Explain Crane Brinton's Theory of A Revolution.
What is the company fixed cost : The short-run cost function of a company is given by the equation TC = 400 + 35q, where TC is the total cost and q is the total quantity of output, both measure
What is the amount of the monthly payments : The annual interest rate on the loan is 13.66 percent of the unpaid balance. What is the amount of the monthly payments
Represents the design of hernandez study : As a secondary mathematics teacher, Hernandez conducted a study that explored whether giving children recess prior to testing helped their test performance.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much salary must gander pay patrick

How much salary must Gander pay Patrick during the period December 1 through December 31, of the current year, to permit the corporation.

  Determine the allocation of factory overhead to job order

Determine the allocation of factory overhead to Job Order, On March 31, 2018, Alpha Corporation recorded the following factory overhead costs incurred

  Prepare the journal entries to record the contributions

Defined benefit obligation $1,600,000. Prepare the journal entries to record the pension expense and the contributions for 2019

  Determine which alternative the company should select

Simnet Solutions Inc. manufactures and sells cell phones. For the 2020 business plan, the company estimated the following: Selling Price per unit $750 Variable

  What general fund journal entry should grand marais make

Grand Marais city's fiscal year ends on June 30. Jasper uses encumbrance accounting. On May 6, a purchase order was approved and issued for supplies in the amount of $5,000. Grand Marias received these supplies on June 2, and the $5,000 invoice wa..

  In early january 2009 sanchez builders purchase equipment

in early january 2009 sanchez builders purchase equipment for 102000 to use in operating activities for the next five

  How is success determined in service programs

How is success determined in service programs that must be subsidized, and how does it differ between governmental organizations and nonprofit organizations

  Lilly li apparel is a manufacturer of fashion apparel

1. Identify four problems with the system and describe how you would remedy each of them

  Prepare the journal entry to record the december

Prepare the journal entry to record the December 15 purchase for cash assuming the following alternative unit market prices on that date: a. $10.50, b. $ 9.50.

  At the time the bonds had a remaining discount

A company retired $60 million of its 6% bonds at 102 ($61.2 million) before their scheduled maturity. At the time, the bonds had a remaining discount of $2 million. Prepare the journal entry to record the redemption of the bonds.

  Comopany made thhree purchases of merchndise

In its first month of operations, Hiffin cComopany made thhree purchases of merchndise in the following sequence. 300 untits at $6 400 iunits at $8 500 units at $9 assumjing are 200 units on hand at the end of the period,Compute the costof end..

  Convergence of ifrs and us gaap

Discuss the efforts made toward convergence of International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) on the financial performance reporting by business enterprises.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd