Bulldogs Inc. wants to establish a bond portfolio consisting only of BDO bonds which has a maturity of 5 years. Bulldogs wants to buy 3 bonds of BDO, with a par value of P1,000 each. These bonds pay 5% yearly interest and has a yield to maturity of 10%. The total value of the bond portfolio after 2 years is (No rounding-off of present value; final answer round to 2 decimal places) a. 2,752,.69 b. 2,626.97 c. 2,256.69 d. 2,111.97

Bulldogs Inc. wants to establish a bond portfolio consisting only of BDO bonds which has a maturity of 5 years. Bulldogs wants to buy 3 bonds of BDO, with a par value of P1,000 each. These bonds pay 5% yearly interest and has a yield to maturity of 10%. The total value of the bond portfolio after 2 years is (No rounding-off of present value; final answer round to 2 decimal places) a. 2,752,.69 b. 2,626.97 c. 2,256.69 d. 2,111.97

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 15P

See similar textbooks

Similar questions

Waylan Sisters Inc. issued 3-year bonds with a par value of $100,000 and a 6% annual coupon when the market rate of interest was 5%. If the bonds sold at 102.438, how much cash did Williams Sisters Inc. receive from issuing the bonds?
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a 1,000 par value, a 10% coupon rate, and semiannual interest payments. a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell? b. Suppose that 2 years after the initial offering, the going interest rate had risen to 12%. At what price would the bonds sell? c. Suppose that 2 years after the issue date (as in Part a) interest rates fell to 6%. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time?
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?