Log in
Finance
1
answer
0
watching
110
views
29 Oct 2018

ABC Corporation's bonds have a 10-year maturity, a 5.75% coupon rate with interest paid semiannually, and a par value of $1,000. If your nominal required rate of return on these bonds is 7.50%, what is the maximum price you should be willing to pay for the bond?

Watch
1
answer
0
watching
110
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Nelly Stracke
Nelly StrackeLv2
1 Nov 2018

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 5.75% coupon paid semiannually (2.875% each 6 months), and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par value, but the P bonds pay a 5.75% annual coupon. Neither bond is callable. At what price should the annual payment bond sell?

1.

Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5.00%, based on semiannual compounding. What is the bond's price?

2.

Keys Printing plans to issue a $1,000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually. The company's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 45.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?

3.

O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal annual, not semiannual yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $875. What is the bond's nominal coupon interest rate?

Consider the two bonds described below:

Bond A

Maturity(years) 15

Coupon rate(%)10

(paid semiannually)

Par Value 1,000

Bond B

Maturity(years) 20

Coupon (%) 6

(paid semiannually)

Par value 1,000

a.If both bonds had a required of 8%,what would the bond's price be?

b.Describe what it means if a bond sells at a discount,at a premium,at its face value (par value).Are these two bonds selling at a discount,premium,or par?

c.If the required return on the two bonds rose to 10%,what would the bond's prices be?

Related Documents

FIN 300 Lecture 7: Chapter 7
azurelouse708
FIN 300 Lecture Notes - Lecture 8: Interest Rate Risk, Sinking Fund
azurelocust49
FIN 300 Lecture Notes - Lecture 7: Interest Rate Risk, Zero-Coupon Bond, Risk Premium
indigodeer21

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in