How much should you be willing to pay for bond

Assignment Help Financial Management

Reference no: EM131869819

Bond X is noncallable and has 20 years to maturity, a 8% annual coupon, and a $1,000 par value. Your required return on Bond X is 9%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 8%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will be worth at the end of 5 years.) Do not round intermediate calculations. Round your answer to the nearest cent.

Reference no: EM131869819

Questions Cloud

Which of the given is a true statement and why : Earl and Lawanda Jackson have been married for 15 years. They have no children. Ned, who is an old friend from high school, has been living with the Jacksons.

Find the effective rate charged by the bank : Bill Blank signed an $8,900 note at Citizen’s Bank. Find the effective rate charged by the bank.

Value corporate bond and annual coupon rate : Last year Janet purchased a $1,000 face value corporate bond with an 11% annual coupon rate and a 25-year maturity.

Bond valuation-interest is paid semiannually : You are considering a 20-year, $1,000 par value bond. Its coupon rate is 8%, and interest is paid semiannually.

How much should you be willing to pay for bond : Bond X is noncallable and has 20 years to maturity, a 8% annual coupon, how much should you be willing to pay for Bond X today?

Why is E-Bay becoming known as a hothouse for CFO : Why is E-Bay becoming known as a hothouse for CFO's? Does it make sense for this company to invest so much money in grooming financial officers.

Yield to call-consider reinvestment rate risk : Since the bonds have been called, investors will no longer need to consider reinvestment rate risk.

What are economic factors important for analysis of nurburg : What are the economic factors that are most important for analysis of Nürburg, Germany related to international business? What are these factors, currently?

How well the project is meeting scope : Earned value management (EVM) is vital for ensuring project performance and helps measure the performance and how well the project is meeting scope.

User Account

All Pages