How much should you pay for the callable bond

Reference no: EM1345217

1. You purchase a 20 year bond , $1,000 par value bond that pays 8% interest semi-annually that can be called in 10 years at a price of 105. If the YTC is 7%, how much should you pay for the callable bond?

Bonus:
If this was not a callable bond, what should you pay for the bond if market rate is 7%?

2. Your parents are giving you $100 at the end of each month for four years while you are in college. At a 6% discount rate, what are these payments worth to you when you first start college?

3. In six years, your daughter will be going to college. You wish to have a fund that will provide her $10,000 per year (end of year) for each of her four years in college. How much must you put into that fund today if the fund will earn 10 percent in each of the 10 years?

4. The Florida lottery agrees to pay the winner $250,000 at the end of each year for the next 20 years. What is the future value of this lottery if you plan to put each payment in an account earning 9 percent?

5. Two-years ago, Trans-Atlantic Airlines sold a $250 million bond issue to finance the purchase of new jet airliners. These bonds were issued in $1000 denominations with an original maturity of 12 years and a coupon rate of 12%. Evaluate the value today of one of these bonds to an investor who requires a 14% rate of return on these securities.

6. Roy, who has just turned 40, would like to have an annual annuity of $20,000 paid over a 20 year period, the first payment occurring on his 66th birthday. How much must Roy save each year (end of year) for the next 25 years to have this annuity, if the investment will earn 12 percent compounded annually?

Reference no: EM1345217

Questions Cloud

Define two advantages to providing timely performance : Define two advantages to providing timely performance feedback to employees. Introduce two instances of possible repercussions of not providing employees with performance feedback in a timely manner.

Chocolate corral is situated in an out-of-the-way small shop : Miss Kitty's Chocolate Corral is situated in an out-of-the-way small shopping center. Nevertheless the company enjoys outstanding business because satisfied customers share their pleasant experiences at Miss Kitty's with their friends and relative..

Show the post-merger integration : Explain what concerns would you have in structuring the deal and the post-merger integration that would be different from the concerns you would have when buying physical capital?

To complete the order that the buyer is required to click : To complete the order that the buyer is required to click on a button that says in reference to certain terms, ‘I agree.'

How much should you pay for the callable bond : Evaluate the value today of one of these bonds to an investor who requires a 14% rate of return on these securities.

Evident in the selected organization''s product life cycle : Estimate two to four weaknesses that are evident in the selected organization's product life cycle. Make a new product design and product selection and then determine three strategies that the organization desires in order to strengthen the operat..

How the changes affected the financial analysis process : How have these changes affected the financial analysis process and are these changes beneficial to financial professional?

Traditional pay systems and incentive pay systems : Deliberate the differences between traditional pay systems and incentive pay systems

Net inflows and outflows of foreign currency : Subsidiary A of Mega Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000.

User Account

All Pages