Pv of the coupon payments

Assignment Help Business Management

Reference no: EM13971211

Yasir strikes oil while working in his back yard. He sells his oil rights to an oil company for $50 million. He wants to use the money for his (early) retirement, but also for living expenses over the next 20 years. His financial advisor recommends he use all of the $50 million to buy a U.S. treasury bond that pays semiannual coupons with an annual coupon rate of 8%, and has 20 years remaining until maturity. The bond is selling for $1,050 and the current yield to maturity on similar bonds is 7 %. Using what he learned in his finance courses, Yasir estimates the PV of the coupon payments, the PV of the bond's par value and the true value of the bond before calls his broker back. What did Yasir probably tell his broker and why? As part iof your answer, replicate Yasir's calculations.

Steps:

(i) Using the appropriate table, compute

PV of coupon payments=

PV of par value =

Price of Bond (B)=

Reference no: EM13971211

Questions Cloud

What will be the size of these payments : You have just borrowed $100,000, and you agree to pay it back over the next 25 years in 25 equal end-of-year payments plus 10 percent compound interest on the unpaid balance. What will be the size of these payments?

Compounded annually grow : What will $5,000 invested for 10 years at 8 percent compounded annually grow to? How many years will it take $400 to grow to $1,671 if it is invested at 10 percent compounded annually? At what rate would $1,000 have to be invested to grow to $4,046 i..

Calculate the expected npv of project : The probabilities of these three conditions are 30%, 50% and 20%, respectively. Calculate the expected NPV of this project

Leasing restatements in the restaurant industry : "Leasing Restatements in the Restaurant Industry" Please respond to the following: From the case study, create an argument for the use of principles-based accounting for leases over rules-based accounting under GAAP, based on the financial statement ..

Pv of the coupon payments : Using what he learned in his finance courses, Yasir estimates the PV of the coupon payments, the PV of the bond's par value and the true value of the bond before calls his broker back. What did Yasir probably tell his broker and why? As part iof y..

Determine the acceleration of a point at the top of wheel : A wheel of radius, b, rolls without slipping at a constant speed, V0, around a circular track of radius, R. The axle of the wheel is a horizontal rod that turns freely on a pivot at the center of the track. Determine the acceleration of a point at..

Effective annual yield and current yield on bonds : One More Time Software has 7.8 percent coupon bonds on the market with 15 years to maturity. The bonds make semiannual payments and currently sell for 90.6 percent of par. Effective annual yield? Current yield on bonds?

Prepare journal entries to record the june 2015 transactions : Prepare journal entries to record the June 2015 transactions for the business and post these journal entries to suitable T accounts - prepare an unadjusted trial balance as at 30 June 2015

Complete an amortization table for this installment note : On November 1, 2009, Norwood borrows $700,000 cash from a bank by signing a five-year installment note bearing 7% interest.

User Account

All Pages