Builtrite bonds have the following: 4 %2% coupon, 16 years until maturity, $1000 par and are currently selling at $965. If you would be happy to make an 5% return, what would you be willing co pay for the bond?

Builtrite bonds have the following: 4 %2% coupon, 16 years until maturity, $1000 par and are currently selling at $965. If you would be happy to make an 5% return, what would you be willing co pay for the bond?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: Assume that in January 2020, the average house price in a particular area was $267,500. In January…

A: The yearly increase in selling price is the percentage increase in the price of a product or asset…

Q: You are looking at investing in undeveloped land that you expect might be worth $2138713 in 9 years.…

A: We need to use present value formula to calculate current price of undeveloped land.WherePV =Present…

Q: A project has the following cash inflows $34,444; $39,877; $25,000; and $52,800 for years 1 through…

A: YearCash flow0 $ -104,000.001 $ 34,444.002 $ 39,877.003 $ 25,000.004 $ 52,800.00To…

Q: Following is information on two alternative investments projects being considered by Tiger Company.…

A: 1.NPV means Net present value.It is a capital budgeting technique used for making investment…

Q: Dollar return Percent return $ %

A: First I'm going to list the formulas and then solve them.

Q: Standard deviation of expected retura. S Y has a 12.0% expected return, a beta coefficient of 1, and…

A: Required rate is rate of return based on risk involved in the stock that is given by beta of stock.

Q: Hawkeye Inc. has an outstanding issue of preferred stock with an annual dividend of $1.21 per share.…

A: Current price of prferred stock is computed as follows:-Current price of prferred stock =

Q: You find the following Treasury bond quotes. To calculate the number of years until maturity, assume…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: Consider the following sample values: 7, 11, 13, 20, 22, 30 What is the sample mean? Express your…

A: Mean is a mathrmatical average return. It is a statistical indicator used to analyze various…

Q: Two years ago, you purchased 100 shares of General Mills Corporation. Your purchase price was $61 a…

A: Dividend yield is calculated on the price, so for dividend yield at the time of purchaser will be…

Q: You are considering making a movie. The movie is expected to cost $10.1 million up front and take a…

A: The payback period tells us the time it takes to recoup the initial cost of an investment or project…

Q: A trader entered into a long S&P index futures contract when the futures price is 2,591 and closed…

A: Futures contract:Futures contract is a standardized contract traded on an exchange in stock market,…

Q: Initial Interest Rate Loan Maturity (years) Margin Above Index Adjustment Interval Points Interest…

A: Interest rate riskA rise in the current rates for new debt instruments might result in investment…

Q: Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of 0.7 and an…

A: We can determine the risk-reward ratio using the formula below:If the stock's ratio is above the SML…

Q: Required information An investment broker that Ava trusts recommended that she purchase a $50,000,…

A: A bond is a legal document that the business must repay the investor for the loan it received from…

Q: Quarter Q1, Jan-Mar Q2, Apr-Jun Q3, Jul-Sep Q4, Oct-Dec You are analysing the effectiveness of…

A: Sales revenue:The firm earns money through sales. The revenue earned from sales operations provides…

Q: Given the information below for StartUp Co., compute the expected share price at the end of 2020…

A: Share price of 2020 = SPS of 2019 * Average price to SPS ratio *(1+Average growth of SPS)

Q: Explain why the comparison of financial ratios may be more meaningful than the comparison of figures…

A: Financial analysis is a crucial aspect of decision-making for investors, creditors, and company…

Q: Bing Enterprises, Inc., has been considering the purchase of a new manufacturing facility for…

A: The present value of all anticipated cash flows (including inflows and outflows) connected to a…

Q: Two mutually exclusive alternatives are being considered for the environmental protection equipment…

A: The AW method is commonly used for comparing alternatives. As illustrated in Chapter 4, AW means…

Q: You have been tasked with using the FCF model to value Julie's Jewelry Co. After your initial…

A: Value of equity:Equity represents the ownership interest in a business or asset, and its value is…

Q: A company plans to make four annual deposits of $6,250 each to a special building fund. The fund's…

A: In an ordinary annuity payments are made at the end of period and future value can be found using…

Q: Which version of a project's payback period should the CFO use when evaluating Project Beta, given…

A: Payback period is the period required to recover the initial investment in the project and does not…

Q: Professor Brad has been offered the following opportunity: A law firm would like to retain his for…

A: To determine the Internal Rate of Return (IRR) for Professor Brad's payment arrangement, we need to…

Q: Consider a project that has an initial cost of $100 million. The project has a payback period of 2…

A: Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or…

Q: An investor will pay $2318.63 for an n-year $2,000 par bond with a coupon rate of 10% compounded…

A: Bonds are debt instruments that can be used to raise public funds for fixed tenure by offering fixed…

Q: If a silver mining company wants to protect against low silver price in the future, it should short…

A: Hedging is used to prevent loss in the spot market by taking opposite position in the future…

Q: a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your…

A: Bond valuation determines the present value of a bond's future cash flows, which include the…

Q: Please rank the weekdays from the highest complaints reported to the lowest for the last 8 months of…

A: First we need to determine the total complaints received in 8 months. Then the day with the highest…

Q: An enterprise needs to set aside a fund to meet the following future annuity payments to an…

A: The payments are made at the beginning of each year. Therefore, there is an annuity due. The present…

Q: Companies A and B have been offered the following rates per annum on a $50 million five-year loan:…

A: SWAP is an instrument which allows an individual to switch the interest rate applicable with another…

Q: k options granted to almost all employees of the firms. What is the rational for offering stock…

A: Stock option is a financial instrument which is similar in providing the features of stocks. Stock…

Q: Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy.…

A: Dividend for Year 1 = d1 = $2Growth in price of dividend each year for next 2 years = gp = $1Growth…

Q: A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of…

A: The default risk premium refers to the increased yield that the investor would agree to by…

Q: Kaskin, Inc., stock has a beta of 1.2 and Quinn, Inc., stock has a beta of .6. Which of the…

A: Beta of a stock is a metric that measures the volatility of returns of a stock when compared to the…

Q: a) What is the DPBP for the investment? Show your answer to 2 decimal places. b) Based on a 10-year…

A: The time it takes for an investment to recoup its initial cost is measured using the discounted…

Q: First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City…

A: 1. Future value in case of account earning simple interest.FV = A +IwhereFV = future valueA =…

Q: a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c.…

A: Capital budgeting refers to a fundamental financial procedure in which organizations evaluate and…

Q: Samantha has holdings of 250 troy ounces of platinum, currently valued at $820 dollars per ounce.…

A: Current Value of 250 Platinum = $ 820Increased Price expectation = $ 844.6 Interest rate = 6%

Q: A company pays the following separate amounts into a fund: £13,000 at t=0, £11,200 at t=4 and £600…

A: Variables in the question:Time Funds0 £13,0004 £11,2008…

Q: What is the APR for this loan how do I answer this using the TVM function

A: The time value of money (TVM) is the financial concept that money available today is worth more than…

Q: A credit card bill shows a balance due of $750 with a minimum payment of $15 and a monthly interest…

A: The monthly interest rate is 1.62%.

Q: Determine the present value of $5,000 that is received at the end of 4 years given that the annual…

A: Present value is the current value of any specified amount which will be received in future at…

Q: Question 2 You just received a graduation gift of $16,000 from your rich aunt. As alumni of UC's…

A: Compounding is the technique of finding out the expected future value of a given present amount.

Q: How much interest would you be paying in the 75th month?

A: Amortization is the process of paying back the debt over time. In an amortizing loan, a portion of…

Q: 6. The Fisher effect and the cost of unexpected inflation Suppose the nominal interest rate on…

A: unexpected inflation costs accumulate when there is a mismatch between supply &demand of market…

Q: A bond that matures in 10 years has a $1,000 par value. The annual coupon interest rate is 8…

A: 1.Present value of Interest payments is computed as follows:-PV = A*wherePV = Present value of…

Q: In practice, a common way to value a share of stock when a company pays dividends is to value the…

A: Common stock is a financial security that depicts an ownership claim to a corporation. The price of…

Q: ybus, Inc. is considering issuing bonds that will mature in 15 years with an annual coupon rate of…

A: Price of a bond can be found as the sum of the present value of the future coupon payments and the…

Q: You're trying to save to buy a new $192,000 Ferrari. You have $42,000 today that can be invested at…

A: FV = A * (1+r)nwhereFV = future valueA = amount investedr = interest raten = time period

Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

Please do not give solution in image format and give me answer in detailed format thankyou

Builtrite bonds have the following: 4 %2% coupon, 16 years until
maturity, $1000 par and are currently selling at $965. If you
would be happy to make an 5% return, what would you be willing
to pay for the bond?
O $927
O $946
O $972
$988

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Computation

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Builtrite bonds have the following: 4 1/2% coupon, 12 years until maturity, $1000 par and are currently selling at $1024. If you purchase this bond, what would be your AYTM?
Builtrite bonds have the following: 5 1/8% coupon, 16 years until maturity, $1000 par and are currently selling at $1032. If you purchase this bond, what would be your AYTM? 4.8 % 4.4% 4.2% irina
Suppose you want to purchase a bond with a $1,000 par value maturing in 4 years with an 8% annual coupon interest rate, and has a market interest rate of 6%. What's the price or the value of this bond? Select one: O a. $1,069.31 O b. $9712 O c. $1,000 7 O d. 927.66
Baywa has an outstanding bond that has a coupon rate of 8.3%. What is the market price of this bond if it pays interest semiannually, has 15 years to maturity, and the current required rate of return is 9% on bonds of similar quality? a. $954 b. $1059 c. $1,000 d. $943
You are considering purchasing the bonds of UTSA that were issued 5 years ago with an original maturity of 25 years. These bonds were originally issued with a coupon rate of 8%. Based on similar bonds in the market, you will require a return of 6% on these bonds which are currently selling for $1,120. How much should you pay for one of these bonds? (6) PV FV PMT N 4
A bond promises to pay you $7,000.00 in 10 years. If you are able to earn 6 percent on securities of equal risks, what would be the present value of the Bond? (to the nearest dollar) Select one: O a. $4,200 O b. $3,589 Oc. $3,727.00 O d. $3,909 A bond will sell at if the required return is greater than the coupon rate.
4) A coupon bond pays this amount every 6 months; $ 30.00 bgs for the number of payments/year; 2 The bond also pays at maturity the par (face) value; $ 1,000.00 Number of years until maturity 15 The required return of holders of this bond is; 8.00% bgs a) What is the PV of the CFs, or what would be the fair price to purchase this bond? b) If the required return of holders of this bond is; 6.00% bgs What is the PV of the CFs, or what would be the fair price to purchase this bond? c) If the required return of holders of this bond is; 4.00% What is the PV of the CFs, or what would be the fair price to purchase this bond? to purchase this bond? bgs d) If the previous bond sells for; $ (976.00) What must be the yield to maturity for this bond (aka IRR) ? (to…
If you purchase a $1000 par value bond for $1048 that has a 5 1/8% coupon rate and 16 years until maturity, what will be your AYTM? O 4.5% O 4.7% O 4.9% O 5.3%
What must be the price of a $1,000 bond with a 5.8% coupon rate, annual coupons, and 15 years to maturity if YTM is 10.5% APR? O A. $652.49 OB. $913.49 O C. $521.99 O D. $782.99
14) Suppose you want to purchase a bond with a $1,000 par value maturing in 4 years with an 8% annual coupon interest rate, and has a market interest rate of 6%. What's the price or the value of this bond? Select one: O a. $9712 O b. $1,069.31 O . 927.66 O d. $1,000
Bond A is a $1,000, 6% quarterly coupon bond with 5 years to maturity.(a) If you bought Bond A today at a yield (APR) of 8%, what is your purchase price? Is this apremium or discount bond? Why?)(b) One year later, Bond A's YTM (APR) has gone down to 6% and you sell it immediately afterreceiving the coupon.(i) What is the current yield? (ii) What is the capital gains yield? (iii) What is the one-year total rate of return (in APR) if the coupons are reinvested at 2%per quarter during the holding period? (iv) Can Bond A’s one-year total rate of return be determined correctly by simply adding upthe current yield and the capital gains yield? Explain your answer without calculations.(c) Consider two other bonds: Bond B and Bond C.Bond B: A $1,000, 7% quarterly coupon bond with 4 years to maturityBond C: A $1,000 zero coupon bond with 2 years to maturity(i) Without calculation, briefly explain which bond in the following pairs has higherinterest rate risk.1) Bond A vs. Bond B 2) Bond B vs.…
Consider a bond that is currently priced at $1100. If the face value of the bond is $1000, coupon payments are made semiannually, the bond matures in 5 years, and the YTM is 3%, what is the coupon rate? Group of answer choices 5.17% 2.58% 3.00% $25.84

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS