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What is the price of a 4​-year, 7.9 % coupon​ rate, $1,000 face value bond that pays interest annually if the yield to maturity on similar bonds is 6.9%​? The price of the bond is ​$ nothing. ​ (Round to the nearest​ cent.)

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Elin Hessel
Elin HesselLv2
28 Sep 2019

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What is the price of a 5-year, 7.6% coupon rate, $1,000 face value bond that pays interest annually if the yield to maturity on similar bonds is 7.4%?

​(Bond valuation​) Flora​ Co.'s bonds, maturing in 9 ​years, pay7 percent interest on a $1,000 face value.​ However, interest ispaid semiannually. If your required rate of return is 9 percent,what is the value of the​ bond? How would your answer change if theinterest were paid​ annually?

a. If the interest is paid​ semiannually, the value of the bondis ​$ . ​(Round to the nearest​ cent.)

Basic bond valuation; Complex Systems has an outstanding issue of

​$1, 000-par-value bonds with a 15% coupon interest rate. The issue pays interest annually and has 17years remaining to its maturity date.

A.If bonds of similar risk are currently earning a rate of return of

9%, how much should the Complex Systems bond sell for​ today?  

B.Describe the two possible reasons why the rate on​ similar-risk bonds is below the coupon interest rate on the Complex Systems bond.

c.If the required return were at 15% instead of 9%, what would be the current value of Complex​ Systems' bond? Contrast this finding with your findings in part a and discuss.

a.If bonds of similar risk are currently earning a rate of return of 9%,

the Complex Systems bond should sell today for     

​$(Round to the nearest​ cent.)

b. Describe the two possible reasons why the rate on​ similar-risk bonds is below the coupon interest rate on the Complex Systems bond.​(Select the best answer​ below.)

A. Since Complex​ Systems' bonds were​ issued, there may have been a shift in the​ supply-demand relationship for their product or a change in the risk towards loans.

B. Since Complex​ Systems' bonds were​ issued, there may have been a shift in the​ supply-demand relationship for money or a change in the risk towards the firm.

C. Since Complex​ Systems' bonds were​ issued, there may have been a change in the​ supply-demand relationship for money or a shift in the​ investors' attitudes towards the firm.

D. Since Complex​ Systems' bonds were​ issued, there may have been a change in the number of bonds available or a change in the coupon interest rate.

C .If the required return were at 15​% instead of 9%, the current value of Complex​ Systems' bond would be $(Round to the nearest​ cent.)

When the required return is equal to the coupon​ rate, the bond value is

▼

A) equal to

B) greater than

C) less than

the par value. In contrast in part a​ above, if the required return is less than the coupon​ rate, the bond will sell at a

▼

A) discount

B) premium

​(its value will be greater than​ par). ​ (Select the best answers from the​ drop-down menus.)

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