Question

Asked Oct 7, 2019

37 views

Assume that you are considering the purchase of a 15-year, noncallable bond with an annual coupon rate of 9.55%. The bond has a face value of $1000, and it makes semiannual interest payments. If you require an 12.50% yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.

Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.

A. $673.92

B. $802.29

C. $689.97

D. $874.49

E. $665.90

Step 1

Step 2

Step 3

Tagged in

Find answers to questions asked by student like you

Q: Let’s learn more about Will and Stephanie and help them determine what the best insurance options ar...

A: Renters Insurance is the insurance of the personal belongings held by the customer. If your personal...

Q: A company releases a five-year bond with a face value of $1000 and coupons paid semiannually. If m...

A: Rule:If annual coupon rate is:Higher than the YTM, the bond will be issued and traded at premiumLowe...

Q: Optimal corporation wants to expand their manufacturing facilities. They have two choices, first to ...

A: Hence, net present value of cash outflow of $290,000 for two years is $558,250Net present value is c...

Q: An investment pays $2,100 per year for the first 7 years, $4,200 per year for the next 7 years, and ...

A: The discount rate is 8.20% compounding quarterly. The cash flows have a periodicity of 1 year. Hence...

Q: Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for t...

A: Calculation of Current Long-Term Rates:The current long-term rates for Year 1 is 2.00%, for Year 2 i...

Q: what would the average tax rate for a person who paid taxes of $6,435 on taxable income of $40,780?

A: Tax Paid = $6,435Taxable Income = $40,780 Calculation of Average Tax Rate:

Q: A bank's loan rate for a machine is 9%. Determine the effective rate on the basis of the compounding...

A: The effective interest rate or the effective annual rate (EAR) is the actual rate paid or earned on ...

Q: NikkiG’s Corporation’s 10-year bonds are currently yielding a return of 6.75 percent. The expected i...

A: Calculate the maturity risk premium (MRP) as follows:

Q: Finance Question

A: The general format for the accounting net income in this case, is as shown on the white board.

Q: Consider a firm with an EBITDA of $14,400,000 and an EBIT of $11,200,000. The firm finances its asse...

A: For the computation of EPS, it is important to compute Interest expense, tax and net income.Debt=$51...

Q: You have maxed out your $10,000 credit card, which is being charged 12.8% annual interest compounded...

A: Calculation of minimum monthly and weekly payments:Answer:The minimum monthly payment and weekly pay...

Q: What is the present value of an annuity of $7,100 per year, with the first cash flow received three ...

A: Calculation of Present Value of Annuity:The cash flow is received in the third year.The present valu...

Q: Explain working capitol using an example.

A: Working capital, as the name suggests, is the capital blocked in the day to day working of the compa...

Q: Cash Flow to Creditors The 2017 balance sheet of Kerber's Tennis Shop inc., showed long-term debt of...

A: Calculation of cash flow to creditors:Hence, the cash flow to creditors during 2018 is -$85,000.Exce...

Q: When the company ships a product to a customer on credit, it risks loosing the Cost of Goods Sold if...

A: Companies who sell the products, they may not get the payments back on time. If the credit term is n...

Q: Bank A pays 6% simple interest annually on its investment accounts. If Bank B pays interest on its a...

A: Bank A: Simple Interest Rate (r) = 6% or 0.06 (Annually)Time Period (t) = 10 years Assumption:Princi...

Q: Hi. How would I go about solving a problem like the two I have submitted? Kathleen just received a...

A: Calculation of bonus value: The bonus value of Kathleen’s dad is $206,608.28.Excel spreadsheet:

Q: A company has an agreement with a bondholder that prevents it from selling several of its coal-fired...

A: Collateral trust: A bond which is protected against financial asset is termed as collateral trust bo...

Q: The cost of raising capital through retained eamings is the cost of raising capital through issuing ...

A: Hi, I’m answering first 3 parts of the question since there are multiple questions asked. If you wan...

Q: Explain the needs that are met by each of the Apple iPhone target market

A: Apple succeeds its target market by focusing on the needs and requirements of,Youngsters: In today’s...

Q: Mr. Jones has a 2-stock portfolio with a total value of $550,000. $185,000 is invested in Stock A a...

A: The formula to calculate the expected risk on portfolio (standard deviation of the portfolio return)...

Q: Your two year old has come to you with concerns about her retirement. She has learned of the concept...

A: Hi, as per our guidelines we will answer the first question alone. Kindly repost the second question...

Q: One-year Treasury bills currently earn 2.90 percent. You expect that one year from now, 1-year Treas...

A: Calculate the current rate on 3-year treasury securities as follows:

Q: Yield to Maturity and Yield to Call Arnot International's bonds have a current market price of $1,25...

A: First three subparts will be answered as per our policies.1)Coupon = 10% of Face value = 10% of 1000...

Q: Everybody’s Fitness's 2021 income statement is reported below (in millions of dollars) (Use corporat...

A: The EF income statement is as follows:

Q: Current ratio = 2.6 timesProfit margin = 10%Sales = $1,270mROE = 10%Long-term debt to Long-term debt...

A: Calculate the current assets as follows:

Q: Bond interest payments before and after taxes Charter Corp. has issued 2,798 debentures with a tot...

A: Calculation of Amount of Interest per bond, Total Interest Expense and After-tax Interest Cost:The A...

Q: Maurer, Inc., has an odd dividend policy. The company has just paid a dividend of $6 per share and h...

A: Calculation of Price of Share today:The price of share today is $65.75.Excel Spreadsheet:

Q: marslow hierarchy of need esteem needs

A: Abraham Maslow’s hierarchy of needs can be explained as diagrammed set of human needs and wants that...

Q: Recently, More Money 4U offered an annuity that pays 5.1% compounded monthly. If $827 is deposited i...

A: Calculate the future value as follows:MS-Excel --> Formulas --> Financials --> FV

Q: An organization's primary operations occur in the U.S. and Europe. However, it has relocated its cas...

A: Outsourcing: A business practice under which company hire a third party to complete a specific task ...

Q: How can i calculate/solve the following problem? the annual subscription to a health magazine is cur...

A: The present value (PV) of cash inflows is the product of annual cash flows and the PVIFA factor. The...

Q: Problem 2-1 Balance Sheet (LG2-1) You are evaluating the balance sheet for Goodman's Bees Corporati...

A: Calculation of Current Assets:

Q: Unequal Lives Shao Airlines is considering the purchase of two alternative planes. Plane A has an ex...

A: Part 1 & 2:Calculation of Net Present Value and Equivalent Annual Annuity:Since Plane B has a hi...

Q: If mutually exclusive projects with normal cash flows are being analyzed, the net present value (NPV...

A: Net Present Value (NPV) is the method by which an investor accepts or reject the project by calculat...

Q: Off-The-Books Investment Firm, LLC, has offered you an investment it says will return to you $20,000...

A: Calculate the annual rate of return as follows:

Q: A firm with a 14% WACC is evaluating two projects for this year’s capital budget. After-tax cash flo...

A: Capital Budgeting:Capital budgeting is a business process in which the firms will evaluate the poten...

Q: During a formal relationship review of a company's bank, the company should discuss all of the follo...

A: A formal relationship review of a company’s bank can discuss the following points:Fees and error rat...

Q: Byron Books Inc. recently reported $13 million of net income. ItsEBIT was $20.8 million, and its tax...

A: Calculate the earnings before tax (EBT) as follows:

Q: Faleye consulting is deciding which of to computer systems yo purchase. It can purchase state-of-the...

A: The concept of equivalent annual annuity is used in capital budgeting. This approach is used for eva...

Q: On April 13, 2017, Yext Inc. completed its IPO on the NYSE. Yext sold 10,500,000 shares of stock at ...

A: (a)Given,Number of Shares Sold = 10,500,000Offer Price per Share = $11 Calculation of total proceeds...

Q: If it cost $50,000 to attend a public university today, what would it cost to attend that same unive...

A: Future value can be defined as the monetary value of an asset on an individual date in future assumi...

Q: Zane Corporation has an inventory conversion period of 48 days, an average collection period of 33 d...

A: It is given thatInventory conversion period is 48 days.Average collection period is 33 days.Payables...

Q: One of the most important components of stock valuation is a firm's estimated growth rate. Financial...

A: Calculate the growth rate as follows:

Q: Which would provide a bank holding company with guidance on the types of nonbanking activities it ca...

A: Bank Holding Companies are governed by Bank Holding Company Act (BHC Act) of 1956, which gives Feder...

Q: If you have $375,000 saved for retirement, how many years will it last if you earn an annual interes...

A: Perpetuity can be defined as the series of fixed cashflow in equal interval for an indefinite period...

Q: You buy a 20-year bond with a coupon rate of 8.8% that has a yield to maturity of 9.8%. (Assume a fa...

A: Face Value (FV) = $1,000Annual Coupon Rate = 8% Calculation of semi-annual coupon payment:

Q: An Iowa state savings bond can be converted to $100 at maturity 22 years from purchase. If the state...

A: Calculation of bond price:The price at which the state can sell its bond is at $18.39.Excel spread s...

Q: The New Fund had average daily assets of $3.2 billion in the past year. The fund sold $500 million ...

A: a.Given,Average Daily Assets = $3,200,000,000Fund Sold = $500,000,000a.Given,Average Daily Assets = ...

Q: Suppose a security follows a geometric Brownian motion with interest rate r=0.01, volatility paramet...

A: The formula I have for simlating the prices have mu and sigma, but no r (Interest rate). Please repo...