The current yield and the yield to maturity of the bond

Assignment Help Financial Management
Reference no: EM132065592

A bond has a coupon rate of 8.5%, a maturity date of 1 June 2027, a current value of £97.00 and coupon frequency is semi- annual.

(a) If today is 1 June 2017, calculate the nominal yield, the current yield and the yield to maturity of the bond.

(b) Using the YTM calculation in part a) calculate the current price for the bond and discuss your findings.

(c) Critically assess the important assumptions made when you calculate the yield to maturity.

Reference no: EM132065592

Questions Cloud

Obtained probability in an experiment : If the obtained probability in an experiment equals 0.1500, then the probability that chance alone is at work equals 0.1500. Is this statement true? Explain.
Some of the most important risks associated with bonds : What are some of the most important risks associated with bonds?
What are your assumptions or underlying beliefs about nurses : What are your assumptions or underlying beliefs about: Nurses? Patients? Other healthcare providers? Define the major domains of nursing and provide examples.
Planned contrast for baseball versus football players : Conduct a planned contrast for Baseball versus Football players (using Tukey's HSD).
The current yield and the yield to maturity of the bond : If today is 1 June 2017, calculate the nominal yield, the current yield and the yield to maturity of the bond.
Advantages and disadvantages of convertible bonds : What are the advantages and disadvantages of convertible bonds to both the company issuing the bonds and the investor buying the bonds?
Sample data for inferences about the general population : What methods of statistics can be used with the sample data for inferences about the general population? Explain.
When implementing straddle and inverse straddle position : Explain what the speculative position is when implementing a straddle and inverse straddle position.
Describe method for the dissemination of your ebp project : Describe one internal and one external method for the dissemination of your EBP project results. For example, an internal method may be the hospital board.

Reviews

Write a Review

Financial Management Questions & Answers

  Difference between historical-implied market risk premium

What is the difference between historical and implied market risk premium and which one is the most appropriate?

  Assigned the task of developing new exciting product line

You work for Toyota. After the recent problems with car recalls, you have been assigned the task of developing a new exciting product line. Your idea is the Toyota Toy-boat-a: an amphibious 4x4 that can be used across jungle, desert, swamp, and river..

  Determine the most likely sources of fraud

Analyze your current place of employment or school and determine the most likely sources of fraud.

  The bonds make semiannual payments- what is the ytm

Heginbotham Corp. issued 15-year bonds two years ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If these bonds currently sell for 109 percent of par value, what is the YTM?

  What is the firm economic value added

Patterson Brothers has operating income for the year of $2,800,000 and a 40% tax rate. What is the firm's EVA(economic value added)?

  Long-term debt and equity financing

Miletkov company's total assets fluctuate between $320000 and $410000, while its fixed assets remain constant at 260000. If the firm follows a maturity matching, or moderate, working capital financing policy, what is the likely level of its long-term..

  Fixed selling and administrative costs

U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs total $1,040 per month, while fixed selling and administrativ..

  What is the aftertax cost of debt

What is the company’s WACC? What is the aftertax cost of debt?

  What is the current value of this stock to you

Knight Supply Corp. has not grown for the past several years, and management expects this lack of growth to continue. The firm last paid a dividend of $4.30. If you require a rate of return of 17.0 percent, what is the current value of this stock to ..

  Which the company should be sold at that future time

Based on the present value you calculated what would be a reasonable amount for which the company should be sold at that future time?

  Bond-yield-plus-risk-premium method

The text identifies three methods for estimating the cost of common stock from reinvested earnings (not newly issued stock): CAPM method, DCF method, and Bond-yield-plus-risk-premium method.

  Makes his first contribution to savings today

makes his first contribution to savings today and all contributions to savings are equal?

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