What is the yield to maturity of the par bond

Assignment Help Financial Management

Reference no: EM131620315

Masters Corp. issues two bonds with 18-year maturities. Both bonds are callable at $1,040. The first bond is issued at a deep discount with a coupon rate of 8% to yield 13.7%. The second bond is issued at par value with a coupon rate of 15.00%.

a. What is the yield to maturity of the par bond? (Round your answer to 2 decimal places.)

Yield to maturity %

b. If you expect rates to fall substantially in the next two years, which bond would you prefer to hold?

Bond with a coupon rate 8%

Bond with a coupon rate 15.00%

Reference no: EM131620315

Questions Cloud

Hedging anticipated loan with an interest rate call option : Determine the effective annual rate on the loan with and without the call option for each of the following outcomes:

Yield to maturity remains unchanged : what will be the approximate capital gain of this bond over the next year if its yield to maturity remains unchanged?

What do we expect our revenue to be in the coming year : Last year our capitated contract covered 640,000 lives and paid us $800 per member per month. What do we expect our revenue to be in the coming year? And why?

Assuming the firm has exhausted all retained earnings : Calculate the firm’ weighted average cost of capital for the Collins Company assuming the firm has exhausted all retained earnings.

What is the yield to maturity of the par bond : Masters Corp. issues two bonds with 18-year maturities. What is the yield to maturity of the par bond?

What is maximum price per share schultz should pay for arras : Schultz Industries is considering the purchase of Arras Manufacturing. What is the maximum price per share Schultz should pay for Arras?

Capital budgeting can be affected by exchange rate risk : Capital budgeting can be affected by exchange rate risk, political risk, transfer pricing, and strategic risk.

This debt must be repaid in two equal installments : This debt must be repaid in two equal installments. Assume debt tax shields have a net value of $0.20 per dollar of interest paid.

What must your deposit each year be : If the interest rate is assumed to be 10% per year for each of the net 20 years, what must your deposit each year be?

User Account

All Pages