User Account

All Pages

What is the yield to maturity of bond

Assignment Help Finance Basics
Reference no: EM133060932

Microsoft is an AAA-rated firm. It has a 16-year bond with an annual coupon rate of 4% paid semi-annually. The bond is selling for 105.

a.What is the yield to maturity of this bond?

b.The new Windows software has had abysmal sales, and as a result, the firm is downgraded to AA-rated. The yield to maturity on AA-rated bonds is 5% per year. What will be the price of the above bond after the downgrade?

c. Calculate the percentage in bond price from part (a) to part (b). Why do you think the bond price changed by such a large percentage?

Reference no: EM133060932

Questions Cloud

Determine the optimal capital structure : Explain how to determine the optimal capital structure.
What is the current yield : 1. You purchase a $1,000 bond that matures in 10 years and has a 6.5% coupon rate. If interest rates rise to 7.25% what would be the price of the bond?
Appropriate valuation for accessline : What is an appropriate valuation for AccessLine? Do analyses using the Venture Capital Method (target discount rate = 60%), the Comparable Companies Method, and
Which project should be accepted and why : The required rate of return is 14.9 percent for Project A and 14.7 percent for Project B. Which project(s) should be accepted and why
What is the yield to maturity of bond : Microsoft is an AAA-rated firm. It has a 16-year bond with an annual coupon rate of 4% paid semi-annually. The bond is selling for 105.
What is the npv on project : Applied IT Ltd. is planning to spend $950,000 on a new marketing campaign. It believes that this action will result in additional cash flows of $250,000 over th
Methods of capital budgeting : Find an article where one of the methods of capital budgeting (net present value, payback period, profitability index, etc ) is used by a company for a project
Determine the break-even point in rupees : The Little Rock Company shows fixed expense of $12150, an M/S ratio of 25%, Determine the break-even point in rupees
Assumption that you expect the yields to maturity : We have done some examples of holding period returns in class, and this assignment will ask you to calculate this number for several investments. As a reminder,

Reviews

Write a Review

Finance Basics Questions & Answers

  Do some take no steps to protect their firms from failure

Most people who start small businesses are aware of the high failure rate and the reasons for it. Why, then, do some take no steps to protect their firms from failure? What steps should they take?

  Calculate the monthly mortgage payment made

1.Calculate the monthly mortgage payment made at the beginning of each month on a $100,000 mortgage. The mortgage is for 15 years and the interest rate in 5.5 percent.

  What are the firms accounts receivables turnover

Loretta Inc., has net sales of $760,000 and accounts receivables of $168,000. What are the firm's accounts receivables turnover?

  Draw another sml on the graph

Assume that you expect the economy's rate of inflation to be 3 percent, giving an RFR of 6% and a market return (RM) of 12 percent.

  What is the current share price

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 19 percent for the next 3 years, with the growth rate falling off to a constant 3 pe

  Difference between market risk and incremental risk

What is the difference between market risk and incremental risk and why they are both important factors when looking at a stock market portfolio.

  What is the firm market value weight of equity

Tarrasa Mining Corporation has 9.3 million shares of common stock outstanding and 215,000 6.1% semiannual bonds outstanding, par value $1,000 each.

  What is the value of the bond in given problem

Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is $1,000.

  Calculate npv for both conveyer systems

Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $335,000, has a 4-year life

  Describe the characteristics of portfolio

Your portfolio consists of $50,000 invested in Stock X and $50,000 invested in Stock Y. Both stocks have an expected return of 15 percent, a beta of 1.6, and a standard deviation of 30 percent.

  Discuss rational expectations

Discuss Rational Expectations and use an example from your own experience

  Benefits of diversification

(b) (i) Briefly explain, in general, when there would be "benefits of diversification" (for any portfolio of two securities).

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd