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6 Feb 2018

Determine the interest payment for the following three bonds (Assume a $1,000 par value.) (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places):
3.20 percent coupon corporate bond (paid semiannually) $
3.95 percent coupon Treasury note $
Corporate zero coupon bond maturing in ten years $

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Hubert Koch
Hubert KochLv2
8 Feb 2018

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Jackson Corporation's bonds have 25 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. The bonds have a yield to maturity of 10%. What is the current market price of these bonds? Round your answer to the nearest cent.

Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Round your answer to two decimal places.

he real risk-free rate of interest is 2%. Inflation is expected to be 3% this year and 6% during the next 2 years. Assume that the maturity risk premium is zero.

What is the yield on 2-year Treasury securities? Round your answer to two decimal places.
%

What is the yield on 3-year Treasury securities? Round your answer to two decimal places.
%

A Treasury bond that matures in 10 years has a yield of 3%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.7%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.

Jackson Corporation's bonds have 25 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. The bonds have a yield to maturity of 10%. What is the current market price of these bonds? Round your answer to the nearest cent.

Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Round your answer to two decimal places.

he real risk-free rate of interest is 2%. Inflation is expected to be 3% this year and 6% during the next 2 years. Assume that the maturity risk premium is zero.

What is the yield on 2-year Treasury securities? Round your answer to two decimal places.
%

What is the yield on 3-year Treasury securities? Round your answer to two decimal places.
%

A Treasury bond that matures in 10 years has a yield of 3%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.7%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.

Suppose your company needs to raise $36 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent, and you’re evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 7 percent and a zero coupon bond. Your company’s tax rate is 30 percent. Both bonds will have a par value of $1,000.
a-1. How many of the coupon bonds would you need to issue to raise the $36 million?
Number of coupon bonds
a-2. How many of the zeroes would you need to issue? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Number of zero coupon bonds
b-1.

In 25 years, what will your company’s repayment be if you issue the coupon bonds? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Coupon bonds repayment $
b-2.

What if you issue the zeroes? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Zeroes repayment $

c.

Calculate the aftertax cash flows for the first year for each bond. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, i.e. 1,234,567.)

Coupon bonds (Click to select)InflowOutflow $
Zero coupon bonds (Click to select)InflowOutflow $

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