User Account

All Pages

Determining the bond price

Assignment Help Finance Basics
Reference no: EM133070714

There is an investment opportunity that will pay you $5 each quarter for fifteen years. The investment has a beta risk of 0.8. The annual market risk premium and risk-free interest rate are 8% and 2%, respectively. [hint: the rate you compute using the CAPM is in an EAR]

(a) If I am selling a security based on such an investment opportunity (that is, it has the same benefit and risk as the above investment opportunity), how much are you willing to pay?

(b) Suppose there is a fifteen-year bond that pays 3% coupon per year (on a semi-annual basis) and with a face value of $1000. The bond has beta risk of 0.2. What should be the bond price?

c) If I allow you to convert the bond into my security, what should be the term of conversion? (i.e. how many bonds for each shares of my security?)

Reference no: EM133070714

Questions Cloud

What is annual sales volume in units required to break even : A firm has fixed cost of $50,000 per month and variable manufacturing costs of $1.25 per unit. What is annual sales volume in units required to break even
What is the initial outlay for project : RET Inc. currently has one product, low-priced stoves. RET Inc. has decided to sell a new line of medium-priced stoves. Sales revenues for the new line of stove
Explain what a shariah compliant stock is : The Shariah Advisory Council of Securities Commission Malaysia introduced a revised screening methodology to determine the Shariah compliant companies on Bursa
Describe the tests of controls you will use as auditor : Discuss the controls relevant to the process. Describe the tests of controls you will use as auditor. Were the controls effective
Determining the bond price : There is an investment opportunity that will pay you $5 each quarter for fifteen years. The investment has a beta risk of 0.8. The annual market risk premium an
Legal Environment Of Business : John, Lesa, and Trevor form a limited liability company. John contributes 60 percent of the capital, and Lesa and Trevor each contribute 20 percent.
Calculate the dollar price change : Calculate the dollar price change for this bond assuming its yield to maturity increased by 10 basis points (i.e. from 6% to 6.1%).
Determining the amount of money : You have been putting your money at the end of year into a saving account at KayaRaya Bank that give you an 18% interest per annum. What is the amount of money
Federal personal income tax : Identify one tax (other than federal personal income tax) you pay and one benefit you utilize that is funded by tax dollars.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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