Text and Cases Problem 8

The value of a bond is found as the present value of interest payments plus

A bond with an annual coupon of $70 and originally sold at par for $1,000. The current market interest rate (yield to maturity) is 8%. This bond will sell at _______. Assuming no change in market interest rates, the bond will present the holder with capital ________ as it matures.

8. Karen has $16,000 that she wants to invest for 1 year. She can invest this amount at The North Bank and earn 5.50 percent simple interest. Or, she can open an account at The South Bank and earn 5.39 percent interest, compounded monthly. If Karen decides to invest at The North Bank, she will:

At what price will the bonds issue? (Do not round PV factors. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Assuming the market interest rate on the issue date is 7%, the bonds will issue at $200,000. Record the bond issue on January 1, 2012, and the first two semi-annual interest payments on June 30, 2012, and December 31, 2012.

g. The $15,000 long-term note is an 8%, 5-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2011.

1. If Mrs. Beach wanted to invest a lump sum of money today to have $100,000 when she retired at 65 (she is 40 years old today) how much of a deposit would she have to make if the interest rate on the C.D. was 5%?

The bonds have 20 years to maturity, pay interest at 9.3%, have a par value of $1,000 and are currently selling for $890.

2. What were the yields on the two representative outstanding Heinz-debt issues as of the end of April 2010? What were they one year earlier?

Through this method, we obtained theoretical yields of the 4.25% coupon bond and 10.625% coupon bond to be 2.899% and 2.639% respectively. The corresponding theoretical prices of the bonds are $108.27 for the 4.25% coupon bond and $149.31 for the 10.625% coupon bond (see Table 1 above).

Jackson Corporation’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 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?

34) If a security pays $110 next year and $121 the year after that, what is its yield to maturity if it sells for $200?

What was the price of the bonds on January 1, 1987, 5 years later, assuming that interest rates had fallen to 10%? (Show in equation form, plug all the relevant numbers and without calculation, say whether the price would be above or below the par value)

First we need to get the present value of the annuity for the 1,500 semiannual PMTs at year 14

3. A european corporation has issued bonds with a par value of Sfr 1,000 and an annual coupon of 5 percent. The last coupon on these bonds was paid four months ago, and their current clean price is 90 percent.