FIRE 311 Study Guide - Final Guide: Market Price, Lead, Risk Premium
14 Apr 2020
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Floating-rate loan interest = libor from week before (libor t 1) + basis points. Calculate the value of a bond that matures in 11 years and has a ,000 par value. The annual coupon interest rate is 12 percent and the market"s required yield to maturity on a comparable-risk bond is 11 percent. Enterprise, inc. bonds have an annual coupon rate of 9 percent. The interest is paid semiannually, and the bonds mature in 14 years. What is its value if the interest is paidannually: semiannually: The market price is ,100 for a 15-year bond (,000 par value) that pays 12 percent annual interest but makes interest payments on a semiannual basis (6 percent semiannually). > 5. 325 x 2 (to get to annual rate) = 10. 65% It has a ,000 par value, will mature in 6 years, and has a coupon interest rate of 9 percent annual interest, but makes its interest payments semiannually.
