How much should you be willing to pay for bond today

Assignment Help Financial Management
Reference no: EM132052749

NO EXCEL : Bond X is non-callable and has 20 years to maturity, an 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 7.5%. How much should you be willing to pay for Bond X today.

Reference no: EM132052749

Questions Cloud

What is the net present value of selling the new item : You are considering adding a new item to your company’s line of products. what is the net present value of selling the new item?
What is the best estimate of the current stock price : Its required return is 12%. What is the best estimate of the current stock price?
Affect retention selection and reinsurance limit selection : Describe the factors that affect retention selection and reinsurance limit selection.
Estimate of these bonds remaining life in years : What is the best estimate of these bonds' remaining life in years?
How much should you be willing to pay for bond today : The yield to maturity on a 15-year bond with similar risk will be 7.5%. How much should you be willing to pay for Bond X today.
Assuming yield to maturity remains constant : Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?
How many shares are outstanding now : If Freya declares a three-for-one stock split, how many shares are outstanding now?
How to invest part of your retirement savings : You are considering how to invest part of your retirement savings. What is the new value of the portfolio?
Summarizes prices of various default-free-zero-coupon bonds : The following table summarizes prices of various default-free, zero-coupon bonds (expressed as a percentage of face value):

Reviews

Write a Review

Financial Management Questions & Answers

  How are most purchases of sports teams financed

How are most purchases of sports teams financed? Why would a league prefer this method of financing? Under what circumstances is equity financing preferred over debt? Why would a sport team seek financing of this nature (as opposed to a bank loan)? H..

  What is the operating cash flow for the project in year

You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-any to be $430 per unit and sales volume to be 1,000 units in year 1; 1,500 units in year 2; and 1,325 units in ..

  Determine its cost of debt-what is the aftertax cost of debt

ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 112 percent of face value. The issue makes semiannual payments and has an embedded cost of 9 percent annua..

  The investment will end with a profit

Your financial advisor recommends you make an investment. She believes the return of the investment is accurately modeled as a normal random variable with mean $3,000 and a variance of $1,440,000. Find the following probabilities: The investment will..

  Calculate the amount of interest

Suppose you wish to have $16,500 in 2 years. Use the present value formula to find how much you should invest now at 8% interest, compounded semiannually in order to have $16,500, 2 years from now. Then calculate the amount of interest.

  Partnerships with the cuban government

Explain why you feel it is ethical and unethical for non-Cuban businesses to enter into partnerships with the Cuban government.

  Bonds for some much-needed expansion projects

BDJ Co. wants to issue new 18-year bonds for some much-needed expansion projects.

  Capitates environment to fee-for-service environment

Which of the following is most likely a fixed cost? Which of the following is most likely a variable cost? Comparing a capitates environment to a fee-for-service environment; in a capitates environment. In a multi-service facility, which of the follo..

  Pocket expenses for both the purchase and the lease

Calculate the total out of pocket expenses for both the purchase and the lease

  Compute the fixed charge coverage ratio

Compute the return on assets (investment). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

  Calculate the yearly rate of return for both bonds

There are two bonds and you have $5,000 of seed money for your investment. STHM bond will mature in 20 years later at repayment of $16,000. TEMPLE bond will mature in 17 years later at repayment of $14,000. Until then there is no interest for both bo..

  Advertising program-compute coefficient of variation

Al Bundy is evaluating a new advertising program that could increase shoe sales. Compute the coefficient of variation.

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