What is the current price of the bond

Assignment Help Financial Management

Reference no: EM13941982

• Assume that the company that you selected for the Module 1 SLP has a bond outstanding that matures in 20 years and has a coupon rate of 6.5%. The par value of the bond is $1,000.

• If the yield to maturity is 8% and the bond pays interest on an annual basis, what’s the current price of the bond? Is the bond selling for a premium or discount? How can you tell?

• If the yield to maturity is 8% but the bond pays interest on a semi-annual basis instead of an annual basis, what’s the current price of the bond? Is it different from the value when using annual compounding? Explain.

• Now, assume that the economy enters into a recession and interest rates fall. The bond’s yield to maturity is now 5%. What’s the bond’s new price? How does the price compare with your answer in part a? Why did the bond’s value change?

• A bond matures in ten years and is currently selling for $1,125. The bond pay interest annually, has a par value of $1,000, and a yield to maturity of 10.75%. What’s the bond’s current yield?

Reference no: EM13941982

Questions Cloud

The self-interest theory of government : The self-interest theory of government was suggested by ______________. a. James Buchanan b. Charles M. Tiebout

How do you prepare a marketing plan : How do you prepare a marketing plan when starting a new sports bar business?

Compute and plot the variation of the rod temperature : Compute and plot the variation of the rod temperature with time during the heating process - what is the initial rate of change of the rod temperature? Confirm the validity of the lumped capacitance approximation.

Effect of occupational fraud and abuse on company : You are the internal accountant at a company that is preparing for an upcoming government contract bid. The management in your company is deciding if it is necessary for the company to perform a full financial status review prior to the bid. As an..

What is the current price of the bond : Assume that the company that you selected for the Module 1 SLP has a bond outstanding that matures in 20 years and has a coupon rate of 6.5%. The par value of the bond is $1,000. If the yield to maturity is 8% and the bond pays interest on an annual ..

Federal income tax ramifications : Complete the statement below that outlines what the Federal income tax ramifications are.A capital gain of $ 80,000 is reported at the corporate level, and each shareholder includes a flow-through of $ 20,000 . David's basis in the S corporation beco..

What should be the price of the stock today : A company just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever. If the required return on the stock investment is 14%, what should be the price of the stock today?

How do we get beyond the stereotypes : How do we get beyond the stereotypes? Before answering this, please read the commencement speech found at http://www.uakron.edu/president/co_12_13_03PM.php .

The start of an election season two candidate with extreme : Suppose at the start of an election season two candidate with extreme positions are running against each other. the median voter model predicts that each candidate will become more moderate because __________.

User Account

All Pages