What should be the initial price of the bond

Assignment Help Financial Management
Reference no: EM131495629

A 10-year, $1,000 par value zero-coupon rate bond is to be issued to yield 9 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. What should be the initial price of the bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) b. If immediately upon issue, interest rates dropped to 8 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) c. If immediately upon issue, interest rates increased to 11 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)

Reference no: EM131495629

Questions Cloud

Compute the approximate yield to maturity : Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity.
How much you would pay for the stock based on dgm model : How much you would pay for the stock based on DGM model?
Find the operating cash flow for year : Find the operating cash flow for the year for Harper? Brothers, Inc. if it had sales revenue of $ 301,900,000 cost of goods sold of $ 133,600,000 sales
About the expected interest rate : Lourdes Corporation's 14% coupon rate, semiannual payment, What is the best estimate of these bonds' remaining life?
What should be the initial price of the bond : What should be the initial price of the bond?
Find a recent news article related to securities trading : From a reputable site, find a recent news article related to securities trading.
What selling price can you achieve your target return rate : If you want to sell the bonds right after receiving the coupon, at what selling price can you achieve your target return rate?
Employee salaries tax return for a year of assessment shows : An employee's salaries tax return for a year of assessment shows:
What was the price you purchased the stocks : What was the price you purchased the stocks at six months ago, if there is no dividend involved?

Reviews

Write a Review

Financial Management Questions & Answers

  Probability that the project will have a net present value

What is the probability that the project will have a negative net present value?- What is the probability that the project will have a net present value greater than $2.2 million?

  About the portfolio return

Portfolio Return At the beginning of the month, you owned $6,200 of Company G, $8,500 of Company S, and $2,000 of Company N. The monthly returns for Company G, Company S, and Company N were 7.75 percent, -1.55 percent, and -.18 percent. What is your ..

  Department has planned stock turnover

During a six-month period, a department has a planned stock turnover of 3.2 and planned sales of $230,000.

  Immediately after coupon payment-calculate the market price

A $10,000 par value bond with coupons at 8%, convertible semi-annually, is being sold three years and four months before the bond matures. The bond is redeemable at $C, and purchase will yield 6% convertible semi-annually to the buyer.

  Gas-powered and electric-powered forklift truck

Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. Calculate the NPV for each type of truck. Wh..

  Debating between a levered and unlevered capital structure

Katlin Markets is debating between a levered and an unlevered capital structure.

  Capital budgeting purposes

Falcon Ridge Developers wants to compute the firm’s WACC for capital budgeting purposes. The firm uses 30% debt, 20% preferred stock and the remainder is in equity. The YTM on the firm’s debt is currently 4.5% and the firm’s marginal tax rate is 40%.

  Define and contrast the walkaway points

Define and contrast the Walkaway Points, Target Points and Asking Price/Initial Offer of the parties. What are some of the strategies that could be used by each party to achieve the outcome they desire?

  About the the growth rate in dividends

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $2.65 next year. The growth rate in dividends for all three companies is 7 percent. The required return for each company's stock is 9.50 percent, 12.10 percent, and 14.20 percent, ..

  Using the strategy and positioning analysis

Complete the following assignment using the "Strategy and Positioning Analysis" template. Describe the organization's background, industry, and product or service. Describe your target market in detail, including information on the geographic, demogr..

  Company plan to acquire to satisfy predicted demand

A company manufactures a product using two machine cells. Each cell has a design capacity of 250 units per day and an effective capacity of 230 units per day. At present, actual output averages 200 units per cell, but the manager estimates that produ..

  What are the current assets

If the current liabilities are $2,575, what are the current assets?

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