Issuance date and the going rate in market for similar bonds

Assignment Help Financial Management

Reference no: EM131068411

John Co. issues a series of bonds with a par value of $1,000 and a maturity of 10 years. The bonds pay interest based upon an annual fixed coupon rate of 6%, but coupon payments are made on a semi-annual basis. The bonds are issued when the going rate in the market for similar bonds is 5%. (a) What price will one John Co. bond sell for at the issuance date? $_______________ (b) Three years pass since the issuance date and the going rate in the market for similar bonds is 8%. If a John Co. bondholder is looking to sell his fixed coupon bond, how much will he be able to sell the bond for? $_______________ (c) Seven years pass since the issuance date and the going rate in the market for similar bonds is 7%. If a John Co. bondholder is looking to sell his fixed coupon bond, how much will he be able to sell the bond for? $_______________

Reference no: EM131068411

Questions Cloud

What is the percentage change in price of bond : Both bond A and bond B have 8.8 percent coupons and are priced at par value. Bond A has 9 years to maturity, while bond B has 18 years to maturity. . If interest rates suddenly rise by 1.4 percent, what is the percentage change in price of bond A and..

Bond equivalent yield and the effective annual return : A Treasury bill with 131 days to maturity is quoted at 96.920. What is the bank discount yield, the bond equivalent yield, and the effective annual return?

Spot interest rates for maturities of one : Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 6.5% r2 = 7.0% r3 = 7.7% r4 = 8.5% What are the following forward rates, where f1, k refers to a forward rate for the period beginning in one year and ..

Determine the main constraints of the course : Explain the method and process that you used for uploading and maintaining your assets into the LMS (e.g., determining where to place the assets, in what order, etc.). Next, explain how you will document the need for revisions to the course as wel..

Issuance date and the going rate in market for similar bonds : John Co. issues a series of bonds with a par value of $1,000 and a maturity of 10 years. The bonds pay interest based upon an annual fixed coupon rate of 6%, but coupon payments are made on a semi-annual basis. What price will one John Co. bond sell ..

Corporations can extend their operations : Corporations can extend their operations by: purchasing another corporation's stock. invoking their appraisal rights. selling their voting stocks. getting involved in the process of zoning.

Calculate the value of the firm and the firms equity : The MoMi Corporation’s income before interest, depreciation and taxes, was $3.1 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 19% of pre..

Find the yield rate of this investment strategy : Set up an absolute matching strategy for the payment of $56,000 after one year, $62,500 after two years, $75,600 after three years, and $80,000 after four years if the annual coupon for the one year bond is 2%, for the two year bond 5%, the three yea..

Current assets that could be sold for their book value : A firm has current assets that could be sold for their book value of $24 million. The book value of its fixed assets is $62 million, but they could be sold for $92 million today. The firm has total debt with a book value of $42 million, but interest ..

User Account

All Pages