What is maximum price-you should be willing to pay for bond

Assignment Help Financial Management

Reference no: EM131057738

Assume that you wish to purchase a 15-year bond that has a maturity value of $1,000 and a coupon interest rate of 11%, paid semiannually. If you require a 6.5% rate of return on this investment (YTM), what is the maximum price that you should be willing to pay for this bond? That is, solve for PV.

Reference no: EM131057738

Questions Cloud

False regarding the interest rate used in npv calculations : Which of the following statements is false regarding the interest rate used in NPV calculations? a. Some companies use their cost of capital as the discount rate.

Biotech sunglasses-what is variable cost per unit : Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $10.00 per unit, and the variable labor cost is $5.50 per unit. a. What is the variable cost per unit? Suppose NSI incurs fixed costs of $500,000 during a year in..

Preliminary work of developing the organization : Your company's chief financial officer (CFO) begins the preliminary work of developing the organization's financial plan for the upcoming year. Recently, there have been media reports that your state will be cutting health care costs by reducing b..

Find out what is the nominal yield to maturity first : A bond with a face value of $1,000 matures in 9 years and has a 7% semiannual coupon. The bond currently sells for $846. You would pay $846 for each bond if you think that a “fair” market interest rate (discount rate) for such bonds is ____. (hint: f..

What is maximum price-you should be willing to pay for bond : Assume that you wish to purchase a 15-year bond that has a maturity value of $1,000 and a coupon interest rate of 11%, paid semiannually. If you require a 6.5% rate of return on this investment (YTM), what is the maximum price that you should be will..

Margins and overnight delivery : Consider the pharmaceutical and the chemical industries. In the pharmaceutical industry, products have high margins and overnight delivery typically is used.

Illustrate how e-commerce or erp implementation integrated : Illustrate how its e-commerce or ERP implementation integrated with related ICT (information and communication technologies- data mining, business intelligences, data ware house, databases, internet, RFID, VAN, EDI)?

Zero coupon bonds have highest reinvestment rate risk : All else equal, 20-year T-bonds have less price risk than 5-year T-bonds. All else equal, bonds with 5% coupon rate have more reinvestment rate risk than bonds with 10% coupon rate. All else equal, bonds with 5% coupon rate have less price risk than ..

Collective bargaining agreement : A collective bargaining agreement (union contract) specifies that management may implement work rules. This part of the contract is referred to as:

User Account

All Pages