Ale Company issued noncallable bonds at a premium. If the current market interest rate is 7%, what coupon interest rate would the bonds have? a. 6.0% b. 7.8% c. 6.4% d. 7.0% Please give a detail expla
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Ale Company issued noncallable bonds at a premium. If the current market interest rate is 7%, what coupon interest rate would the bonds have?
a. 6.0%
b. 7.8%
c. 6.4%
d. 7.0%
Please give a detail explanation.
Step by step
Solved in 2 steps
- Which of these two bonds offers the highest current yield? Which one has the highest yield to maturity? a. A 6.55 percent, 22-year bond quoted at 52.000 b. A 10.25 percent, 27-year bond quoted at 103.625a. Assuming the bonds will be rated AA, what will the price of the AA-rated bonds be? b. How much total principal amount of these bonds must HMK issue to raise $9million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume all fractions are rounded to the nearest whole number.) c. What must the rating of the bonds be for them to sell at par? d. Suppose that when the bonds are issued, the price of each bond is $970.43. What is the likely rating of the bonds?Are they junk bonds? Note: Assume annual compounding.If 8-year T-bonds have a yield of 6.36%, 8-year corporate bonds yield 8.36%, the maturity risk premium on all 8-year bonds is 1.22%, and corporate bonds have a 0.35% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Group of answer choices 1.77% 1.75% 1.80% 1.65% 1.62%
- For all questions, assume par value is R 1,000 and semiannual bond interest payments. a) A company in a line of business similar to ABSA recently issued at par noncallable bonds with a coupon rate of 5.8% and a maturity of 20 years. The bonds were rated Aaa by Moody’s and AAA by Standard & Poor’s. What rate of return (yield to maturity) did investors require on these bonds if the bonds sold at par value?If 10-year T-bonds have a yield of 4.0%, 10-year corporate bonds yield 7.6%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.23% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Round 2 decimal placesIf 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9.2%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?
- If a P1,000 bond sells for P1,125, which of the following statements are correct? I. The market rate of interest is greater than the coupon rate on the bond. II. The coupon rate on the bond is greater than the market rate of interest. III. The coupon rate and the market rate are equal. IV. The bond sells at a premium. V. The bond sells at a discount. a. I and IV b. I and V c. II and IV d. II and VIf 15-year T-bonds have a yield of 6%, 15-year corporate bonds yield 8%, the maturity risk premium on all 15-year bonds is 1%, and corporate bonds have a 0.5% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? (hint: think about what cause the difference in the yields of the 15-year T-bonds and the 15-Year corporate bonds) A. 1.0% B. 0.5% C. 2.0% D. 0.6% E. 1.5%At the time of issue of 4.50% coupon bonds, the eff ective interest rate was 5.00%. Th ebonds were most likely issued at:A . par.B . a discount.C . a premium
- If the YTM on the following bonds are identical except, what is the price of bond B? Bond A Bond B Face value $1,000 $1,000 Semiannual coupon $45 $35 Years to maturity 20 20 Price $1,098.96 ?The following information about bonds A, B, C, and D are given. Assume that bond prices admit noarbitrage opportunities. What is the convexity of Bond D?Cash Flow at the end ofBond Price Year 1 Year 2 Year 3A 91 100 0 0B 86 0 100 0C 78 0 0 100D ? 5 5 105Inc.'s 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.6%. The real risk-freerate is 2.75%, the default risk premium for Crockett's bonds is DRP = 1.35% versus zero for T-bonds, theliquidity premium on Crockett's bonds is LP = 0.90% versus zero for T-bonds, and the maturity riskpremium for all bonds is found with the formula MRP = (t – 1) × 0.1%, where t = number of years tomaturity. What inflation premium (IP) is built into 5-year bond yields?
