Issued bonds at face value at a yield to maturity

Assignment Help Financial Management
Reference no: EM13826777

A. Several years ago, Castles in the Sand, Inc., issued bonds at face value at a yield to maturity of 5.8%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is the price of the bond? (in dollars)

B. Suppose that investors believe that Castles can make good on the promised coupon payments, but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 85% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? (in percentage %)

Reference no: EM13826777

Questions Cloud

Good decision to issue more debt to market : Your boss has reviewed your results and has made some comment. He argues that it will be a good decision to issue more debt to market in this current economic situation (as debt will be cheaper than equity). Your answer should be based analysis of..
Use as the annual sales figure when evaluating this project : Winnebagel Corp. currently sells 18,000 motor homes per year at $27,000 each, and 7,200 luxury motor coaches per year at $51,000 each. The company wants to introduce a new portable camper to fill out its product line; What is the amount to use as the..
Report on qantas airlines frequent flyer programs : Report on QANTAS Airlines Frequent Flyer Programs
Determining the bonds yield to call : The bond has a nominal yield to maturity (YTM) of 7.5% and it can be called in 4 years at a call price of $1,045. What is the bonds yield to call?
Issued bonds at face value at a yield to maturity : Several years ago, Castles in the Sand, Inc., issued bonds at face value at a yield to maturity of 5.8%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased ..
How the human beings considered by catholic christians : Catholic Christians consider human beings to be "totally _________" with the gift of faith in order that they will accept it including in their intellects, emotions, and wills, so that God must overwhelm them
What is GPCs current equilibrium stock price : Gator Products Company (GPC) is at its optimal capital structure of 70 percent common equity and 30 percent debt. GPC’s WACC is 14 percent. GPC has a marginal tax rate of 40 percent. Next year’s dividend is expected to be $2 per share, and GPC has a ..
Covered as workers compensation claim : It’s the end of the summer and your firm has its annual Family Picnic Day on the Saturday of Labor Day weekend. It is a big event: games for kids, a magician who makes balloon animals, tons of great food, kegs of beer, a band for musical entertainmen..
Constructing three kinds of housing complexes : Emaar is a real estate company based in Dubai and is considering for constructing three kinds of housing complexes. The three kinds of complexes are: small complex, medium complex and large complex.

Reviews

Write a Review

Financial Management Questions & Answers

  The u.s. financial system has many complexities

The U.S. financial system has many complexities, and it is impacted by several environmental factors, including federal regulations and the economy.

  Mandolin bottlers co. has net income

Mandolin Bottlers Co. has net income of $4,272,335 and retains65 percent of its income every year. If the company's internalgrowth rate is 8.6 percent, what is the firm's total assets?

  What are some examples of restrictive covenants that might

If a convertible bond has a conversion ratio of 20, a face value of $1,000, a coupon rate of 8 percent, and the market price for the company’s stock is $15 per share, what is the convertible bond’s conversion value?

  Present value of this investment pays

An investment pays you $20,000 at the end of this year, and $10,000 at the end of each of the four following years. What is the present value (PV) of this investment, given that the interest rate is 4% per year?

  First three years goes toward the repayment of principal

You have a 30-year mortgage with a simple annual interest rate of 8.5 percent. The monthly payment is $1,000. What percentage of your total payments over the first three years goes toward the repayment of principal?

  Hedge their euro and dollar exposure

On January 2d, 2014, Microsoft expects to ship 1,000,000 new X-Boxes from its US plant, which it will sell through EU dealers on 270-day terms at 250 Euro each. So Microsoft will receive payment from its dealers on September 28th, 2014.

  Statements is true regarding sprints stock

A linear regression was done to estimate the relation between Spint's stock returns and the market's return. The intercept of the line was found to be 0.23 and the slope was 1.47. Which of the following statements is true regarding Sprint's stock?

  Find the interest rates earned

Find the interest rates earned on each of the following. Round each answer to two decimal places. You borrow $70,000 and promise to pay back $648,587 at the end of 15 years.

  Create a portfolio equally as risky as the market

You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below: Asset Investment Beta Stock A $ 146,000 .91 Stock B $ 134,000 1.36 Stock C 1.51 Risk-free asset..

  What is difference in sharpe ratio of an optimal portfolio

Stock A has an expected rate of return of 12% and a standard deviation of returns of 40%. Stock B has an expected rate of return of 18% and variance of returns of 0.36. The correlation coefficient between the returns of Stock A and Stock B is 0.25.

  What is the expected return on the mutual fund

Consider the following capital market: a risk-free asset yielding 0.75% per year and a mutual fund consisting of 70% stocks and 30% bonds. The expected return on stocks is 10.75% per year and the expected return on bonds is 3.25% per year. The standa..

  What is the expected return on the portfolio

You own a portfolio that is 27 percent invested in Stock X, 42 percent in Stock Y, and 31 percent in Stock Z. The expected returns on these three stocks are 12 percent, 15 percent, and 17 percent, respectively. What is the expected return on the port..

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