Considering investing in a four-year bond

Assignment Help Financial Management

Reference no: EM131010298

Suppose that you are considering investing in a four-year bond that has a par value of $1,000 and a coupon rate of 6%.

Now suppose that two years have gone by since you bought the bond and that you have received the first two coupon payments. At this point, the market interest rate on similar bonds unexpectedly rises to 10%. How much would another investor be willing to pay for your bond?

Reference no: EM131010298

Questions Cloud

Use the proceeds of the debt issue to retire some equity : Lowell Corp . is an all - equity firm with $ 8 20,000 . It now wants to issue debt and raise the debt ratio to 0.40 from 0.0 without changing total assets. It plans to use the proceeds of the debt issue to retire some equity using a share repurchase...

Difference between the proportion of gen y : Estimate the difference between the proportion of Gen Y and the proportion of Gen X that made a donation via text message using a 99% confidence interval. Provide an interpretation of both the interval and the associated confidence level.

The cost of equity is less than the cost of debt : Suppose Mr. Thomas, president of your company, has hired you to determine the firm's cost of debt and the cost of equity capital. Based on his analysis, Mr. Thomas is recommending that the company increase its use of equity financing because "debt co..

What is happening to the average cost : The average cost function for the weekly manufacture of portable CD players. Weekly production is currently 3,000 players and is increasing at a rate of 100 players per week. What is happening to the average cost?

Considering investing in a four-year bond : Suppose that you are considering investing in a four-year bond that has a par value of $1,000 and a coupon rate of 6%. Now suppose that two years have gone by since you bought the bond and that you have received the first two coupon payments. At this..

Evaluating reservation processes : A hotel chain is interested in evaluating reservation processes. Guests can reserve a room by using either a telephone system or an online system that is accessed through the hotel's web site.

Firms expenditures on fixed assets : Lowell Inc. had an operating income of $2. 6 5 million, depreciation of $1. 3 0 million, and had a tax rate of 40%. The firm's expenditures on fixed assets were $0.4 and its exp enditure to increase net operating working capital was $0. 2 million. Ho..

Generalize the conclusion of the test : Do you think it is reasonable to generalize the conclusion of the test in Part (a) to all California high schools? Explain. Would it be reasonable to use the paired t test with the data on percentage of students taking one or more AP classes? Explai..

Suppose no new common stock was issued or retired : ABC Inc.’s December 31, 201 0 balance sheet showed total common equity of $4,000,000 and 200,000 shares of stock outstanding. During 2011, the firm had $450,000 of net income, and it paid out $1 5 0,000 as dividends. Suppose no new common stock was i..

User Account

All Pages