please give answer for 13,14, and 15 assuming a 10-year investment horizon?13. Redo Q7 and Q8, assuming that the bonds have semiannual rather than annual coupons.14. Suppose you could buy, for $1,000, either a 10%, 10-year, annual payment bond or a 10%, 10-year,semiannual payment bond. Both bonds are equally risky. Which would you prefer? If $1,000 is the properprice for the semiannual bond, what is the proper price for the annual payment bond?15. What is the value of a perpetual bond with an annual coupon of $100 if its required rate of return is 10%?13%? 7%? Assess the following statement: "Because perpetual bonds match an infinite investmenthorizon, they have little interest rate price risk." Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago InsuranceCompany. They are co-directors of the company's pension fund management division, with Campbellhaving responsibility for fixed income securities (primarily bonds) and Morris being responsible forequity investments. A major new client, the California League of Cities, has requested that Mutual ofChicago present an investment seminar to the mayors of the represented cities. Campbell and Morris,who will make the actual presentation, have asked you to help them by answering the followingquestions.6. What are the key features of a bond?7.What is the value of a 1-year, $1,000 par value bond with a 10% annual coupon if its required rate of returnis 10%? What is the value of a similar 10-year bond?8. (1)What would be the value of the bond described in Q7 if, just after it had been issued, the expectedinflation rate rose by three percentage points, causing investors to require a 13% return? Is the securitynow a discount bond or a premium bond?(2) What would happen to the bond's value if inflation fell, and re declined to 7%? Would it now be apremium bond or a discount bond?(3) What would happen to the value of the 10-year bond over time if the required rate of return remained at(i) 13% or (ii) remained at 7%?9. (1) What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for$887.00? That sells for $1,134.20? What does the fact that a bond sells at a discount or at a premium tellyou about the relationship between ra and the bond's coupon rate?(2) What is the current yield, the capital gains yield, and the total return in each case in the precedingquestion?10. Suppose that the bond described in Q9 is callable in 5 years at a call price equal to $1,090. What is theyield to call (YTC) on the bond if its market value is $887? What is the YTC on the same bond if its currentmarket price is $1,134.20?11. What is interest rate price risk? Which bond in Q7 has more interest rate price risk, the one-year bond orthe 10-year bond?12. What is interest reinvestment rate risk? Which bond in Q7 has more interest rate reinvestment rate risk,

The series of multiple questions regarding bond valuation , we will be calculating the bond…

assuming a 10-year investment horizon? 13. Redo Q7 and Q8, assuming that the bonds have semiannual rather than annual coupons. 14. Suppose you could buy, for $1,000, either a 10%, 10-year, annual payment bond or a 10%, 10-year, semiannual payment bond. Both bonds are equally risky. Which would you prefer? If $1,000 is the proper price for the semiannual bond, what is the proper price for the annual payment bond?

assuming a 10-year investment horizon? 13. Redo Q7 and Q8, assuming that the bonds have semiannual rather than annual coupons. 14. Suppose you could buy, for $1,000, either a 10%, 10-year, annual payment bond or a 10%, 10-year, semiannual payment bond. Both bonds are equally risky. Which would you prefer? If $1,000 is the proper price for the semiannual bond, what is the proper price for the annual payment bond?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 1TP: You have just been elected president of a brand-new service club on campus. The club is part of a...

See similar textbooks

Similar questions

Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago Insurance Company. They are co-directors of the company’s pension fund management division, with Campbell having responsibility for fixed income securities (primarily bonds) and Morris being responsible for equity investments. A major new client, the California League of Cities, has requested that Mutual of Chicago present an investment seminar to the mayors of the represented cities. Campbell and Morris, who will make the actual presentation, have asked you to help them by answering the following questions. How do you determine the value of a bond?
Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago Insurance Company. They are co-directors of the company’s pension fund management division, with Campbell having responsibility for fixed income securities (primarily bonds) and Morris being responsible for equity investments. A major new client, the California League of Cities, has requested that Mutual of Chicago present an investment seminar to the mayors of the represented cities. Campbell and Morris, who will make the actual presentation, have asked you to help them by answering the following questions. What are the key features of a bond?
Please make explain each method and formula used, and please break down the steps and formula in Excel to answer each question below. Sam Strother and Shawna Tibbs are vice-presidents of Mutual of Seattle Insurance Company and co-directors of the company's pension fund management division. A major new client, the Northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. 1. How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent? Does the bond sell at par? 2. What would be the value of the bond described in Part a. if, just after it had been issued, the expected inflation rate rose by 1 percentage point, causing investors to require an 11 percent return? Would we…
Sam Strother and Shawna Tibbs are vice-presidents of Mutual of Seattle Insurance Company and co-directors of the company's pension fund management division. A major new client, the Northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. a. How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent? Does the bond sell at par? b. What would be the value of the bond described in Part a. if, just after it had been issued, the expected inflation rate rose by 1 percentage point, causing investors to require an 11 percent return? Would we now have a discount or a premium bond? c. What would be the value of the bond described in Part a. if, just after it had been issued,…
Sam Strother and Shawna Tibbs are vice-presidents of Mutual of Seattle Insurance Company and co-directors of the company's pension fund management division. A major new client, the Northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. a) How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent? Does the bond sell at par? b) What would be the value of the bond described in Part a. if, just after it had been issued, the expected inflation rate rose by 1 percentage point, causing investors to require an 11 percent return? Would we now have a discount or a premium bond? C) What would be the value of the bond described in Part a. if, just after it had been issued,…
Sam Strother and Shawna Tibbs are vice-presidents of Mutual of Seattle Insurance Company and co-directors of the company's pension fund management division. A major new client, the Northwestern Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent? Does the bond sell at par?
Sam Short, CFA, has recently joined the investment management firm of Green, Spence, and Smith (GSS). For several years, GSS has worked for a broad array of clients, including employee benefit plans, wealthy individuals, and charitable organizations. Also, the firm expresses expertise in managing stocks, bonds, cash reserves, real estate, venture capital, and international securities. To date, the firm has not utilized a formal asset allocation process but instead has relied on the individual wishes of clients or the particular preferences of its portfolio managers. Short recommends to GSS management that a formal asset allocation process would be beneficial and emphasizes that a large part of a portfolio’s ultimate return depends on asset allocation. He is asked to take his conviction an additional step by making a proposal to executive management.a. Recommend and justify an approach to asset allocation that could be used by GSS.b. Apply the approach to a middle-aged, wealthy…
Tammy Potter, a new partner with the regional CPA firm of Tower & Tower, was recently appointed to the board of directors of a local civic organization. The chairman of the board of the civic organization is Lewis Edmond, who is also the owner of a real estate development firm, Tierra Corporation. Potter was quite excited when Edmond indicated that his corporation needed an audit and he wished to discuss the matter with her. During the discussion, Potter was told that Tierra Corporation needed the audit to obtain a substantial amount of additional financing to acquire another company. Presently, Tierra Corporation is successful, profitable, and committed to growth. The audit fee for the engagement should be substantial. Because Tierra Corporation appeared to be a good client prospect, Potter tentatively indicated that Tower & Tower wanted to do the work. Potter then mentioned that Tower & Tower’s quality control policies require an investigation of new clients and approval…
You have been appointed as a financial consultant to Non profit organization club to assist them in restructuring their finance. Explain to the executives the types of accounts they are to prepare at the end of the period and if it is different from the partnership Accounts
The manager responsible for the pension fund of Ruthin plc has to present a report to the Board of Directors on the financial position of the fund. He decides to use the position of the typical employee to illustrate the fund’s position. There is £30,000 currently held in the fund for each employee. The typical employee has 15 years to go to retirement and the company’s actuary has proposed that the company should anticipate having to fund pension payments over a retirement period of 12 years for the average employee. The average pension payment per annum is expected to be £12,000 and the rate of return expected on the pension funds investment is expected to be 6 per cent. The manager needs to determine the constant annual sum that the company needs to put into the pension fund for each of the next 15 years to be able to meet the fund’s obligations. Determine this annual sum. (Assume all payments into the fund and all pension payments are made at the end of each year.)
Dambrossio Investments is an entity in the mutual funds industry, which provides a group of mutual funds for investors. The components of the corporation’s financial statements are: Net Income Before Taxes = $200,000, Total Assets = $10,000,000. The Planning materiality set by the auditor is: *
The City of St. John operates an investment trust fund for neighboring governments, including St. John County and the independent school district. Assume the investment trust fund began the year 2020 with investments in US government securities totaling $1,300,000, no liabilities, and Restricted Net Position of $1,300,000. The county and school district deposited $3,600,000 in the investment pool. The investment trust fund invested $1,400,000 in corporate bonds and $2,200,000 in US government securities. Interest received by the investment trust fund totaled $40,000 for the year. At year-end, the fair value of the corporate bonds had increased by $8,000. The earnings of the fund (there are no expenses) are allocated among the accounts of the participating governments. Throughout the year, the participating governments withdrew $3,430,000 of funds from the investment trust fund. Assume that an equal amount of short-term investments were converted to cash as they matured. Required:b.…