2. Compute the intrinsic value of a 16 % coupon ,3year maturity bond whose face value (1000B) willbe paid at the end of the maturity . The marketinterest rateis forecast as 15% for the 1st and 2ndyears and ,17 % for the 3rd year.

intrinsic value of bond is present value of coupon payment +Present value of par value of bond.

Compute the intrinsic value of a 16 % coupor ear maturity bond whose face value (1000E) e paid at the end of the maturity. The mark nterest rateis forecast as 15% for the 1st and years and ,17 % for the 3rd year.

Compute the intrinsic value of a 16 % coupor ear maturity bond whose face value (1000E) e paid at the end of the maturity. The mark nterest rateis forecast as 15% for the 1st and years and ,17 % for the 3rd year.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 3P: Current Yield for Annual Payments Heath Food Corporations bonds have 7 years remaining to maturity....

See similar textbooks

Related questions

Q: (Bond valuation) Calculate the value of a bond that matures in 15 years and has a $1,000 par…

A: The value of a bond is determined by calculating the present value of the coupon of the remaining…

Q: Compute the intrinsic value of an 18% coupon, a 4-year maturity bond whose principal will be repaid…

A: Intrinsic value is the present value

Q: Calculate the current yield of a bond with $1,000 face value, 7.50% coupon rate, quarterly coupon…

A: A bond is an instrument that represents the loan that is made by the investor to the company and…

Q: Compute the intrinsic value of an 18% coupon, a 4-year maturity bond whose principal will be repaid…

A: Intrinsic value is calculated by present value of cash flows. Present value of cash flows = Cash…

Q: A bond certificate with a value of P 1,081,038.07 has a par value of P 1,000,000.00 and a redemption…

A: Using financial Calculator, PV (Price) = P 1,081,038.07 FV (Face Value) = P 1,030,000.00 N = 10…

Q: Compute the price of a 3.8% coupon bond with 18 years left to maturity and a market interest rate of…

A: Coupon rate = 0.038 (i.e. 3.8%) Annual coupon amount (C) = $38 (i.e. $1000 * 0.038) Maturity period…

Q: Compute the yield to maturity of a 19% coupon purchased for a 970t three-year bond whose principal…

A: Yield to maturity is the internal rate of return offered by the cash flows of bond. Cash flow of…

Q: current price of

A: Bond price refers to the present discounted value based on some future date of cash generated by…

Q: Lincoln Park Co. has a bond outstanding wth a coupon rate of 5.96 percent and semlannual payments.…

A: Present Value can be calculated using PV function in excel PV (rate, nper, pmt, [Fv], [type])…

Q: A company plans to purchase a zero-coupon bond with a face value of $4,200,000, a time to maturity…

A: Zero coupon bonds are bond that do not pay coupon or interest before the maturity and only pays the…

Q: Find the value of a bond maturing in 7years, with a $1,000 par value and a coupon interest rate of…

A: given data is - Face value = 1000 Coupon rate = 6.5% paid semi annually Coupon payment = 65 Yield =…

Q: A companies corporate bond has 30 years left to maturity, a par value of $1,000, coupon rate of 7.5%…

A: Given:

Q: A $2,000 bond with 8 years to maturity is currently selling for $2,055. If the yield to maturity is…

A: Face Value of Bond = $2000 Coupon Rate = x% Coupon Amount = 2000*x% Yield Rate = 9.5% Current Price…

Q: Prepare a duration table for a coupon bond using the following assumptions: a. $100,000 par value…

A: Duration of bond - it measures the risk of change in price of bond due to change in interest rate in…

Q: peing recently issued bonds with Laturity of 10 years. The coupon r 2% but coupon payments will be…

A: Price of bond =Present value of coupon payment +Present value of par value of bonds.

Q: stevens copr bonds has an annual coupond payment of 7.25%. The bonds have a par value of $1000 and a…

A: Coupon rate = 7.25% Coupon amount (PMT)= 7.25% *1000= 72.50 Current price(PV) = 1125 Face value =…

Q: A 15-year bond has a $1,000 par value bond, a 4% coupon and a yield to maturity of 3.3%. Interest is…

A: Information Provided: Bond term = 15 years Face value = $1000 Coupon rate = 4% Yield to maturity =…

Q: The current price of bond with $1,000 par value, 9.75% annual coupon, and 20 years to maturity is…

A: Using excel RATE function

Q: Compute the yield to maturity of a 13 % coupon 3 year’ maturity bond which was purchased at 960 ₺…

A: The YTM is the rate that makes the present value of the future cash flows equal to the price of the…

Q: Garland Corporation has a bond outstanding $90 annual interest payment , a market price of $820, and…

A: Bonds are referred to as fixed-income instruments issued by companies as they traditionally pay a…

Q: A 10-year, 12 percent semiannual coupon bond, with a par value of $1,000 sells for $1,100. What is…

A: Given details are : Par value of bond = $1000 Current price i.e. present value = $1100 Time period =…

Q: Calculate the present value of a 15-year bond having the following parameters: face value: PLN 500;…

A: As we have annuities (coupon payments) and that too are compounded quarterly, it becomes quite…

Q: Compute the intrinsic value of an 18% coupon ; a 4-year maturity bond whose principal will be repaid…

A: Intrinsic value is present value

Q: Compute the following for a 2-years to maturity, 10% semi-annual fixed coupon bond when its yield-…

A: Time to maturity is 2years Coupon rate is 10% Par value of bond is $100 Coupon frequency is…

Q: A $1,000 par value, 1.0% annual coupon with a maturity in 13 years currently sells for $ 875. What…

A: Current yield = Annual coupon/Bond price YTM is the yield earned when the bond id held to maturity.…

Q: Prepare a duration table for a coupon bond using the following assumptions: a. $100,000 par value…

A: Duration is the period taken for collecting amount invested in the bond. Given: Par value = $100,000…

Q: Compute the intrinsic value of a 4 year maturity 15 % coupon bond , whose face value will be repaid…

A: Intrinsic value seems to be the expected or estimated value of a business, share, currencies, or…

Q: Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds…

A: Given: Bond value= $1,000 Coupon rate = 10% Maturity period= 6 years Market price = $865

Q: Compute the yield to maturity of a 13 % coupon 3 year' maturity bond whích was purchased at 960…

A: The question is based on the concept of Bond valuation.

Q: Calculate the current price of a 4-year corporate bond with a par valueof €1,000 that makes annual…

A: The coupon rate is 6%.Yield to maturity is 5%.Bond makes annual payments.Number of years is 4.Bond…

Q: Calculate the yieid to maturity of the corporate bond with a maturity value of $1000 and a coupon…

A: YTM is the rate of return a bond generates over its maturity period assuming that the coupons are…

Q: A bond matures in 15 years and pays an 8 percent annual coupon. The bond has a face value of $1,000…

A: Current yield = coupon price /current market price Yield on bond is rate we earn if we held the bond…

Q: The face value of the bond is $10,000 with annual coupon payment. The maturity period is 6 years…

A: The bond duration is used to measure the actual time it takes for the bond to recover its costs…

Q: What is the yield to maturity for the following bond: current price is $908, coupon rate is 11…

A: Here, Present value (PV) = $908 Maturity value (FV) = $1,000 Coupon rate = 11% Time to maturity (n)…

Q: Assume that a company issued a semi-annual bond with $1000 face value, 10% coupon rate and 15 years…

A: Working note:

Q: Compute the intrinsic value of an 18% coupon, a 4-year maturity bond whose principal will be repaid…

A: Intrinsic Value of Coupon = Present Value of Coupons + Present Value of principal repayment

Q: 1-annually, has 17 years remaining to maturity, and has a coupon rate of 6.00%. If the bond sells…

A: Yield To Maturity: It is the total rate earned for holding the bond till its maturity. This yield to…

Q: 1. Compute the yield to maturity of a 13 % coupon 3 year' maturity bond which was purchased at 960 Ł…

A: Yield to maturity of bond is the internal rate of return offered by the bond on current selling…

Q: Gabby's Garage issued a bond with a 10-year maturity, a $1,000 par value, a 10 percent coupon rate,…

A: The coupon rate is the interest rate of a bond that is used to determine the interest payment, the…

Q: A bond has a $1,000 par value, 10 years to maturity, and a 7% annual coupon and sells for $985.…

A: Yield to maturity (YTM) is the total return expected on the bond if the bold is held till maturity.…

Q: Calculate the current yield on a bond with the following characteristics: par value of $1000,…

A: Par value (FV) = $1000 Years to maturity = 17 Years Number of semi annual coupon payments (n) = 17*2…

Q: A 15-year bond has a $1,000 par value bond, a 4 percent coupon, and a yield to maturity of 3.3…

A: Calculating the current price of bond. We have,Current price of bond = C [1 – (1 / (1+r)n ] / r +…

Q: A bond with 15 years to maturity, a face value of $1000, pays a coupon rate of 14% APR compounded…

A: Solution:- Yield-to-maturity means the rate of return earned by bond holder, if the bond is hold…

Q: Compute the price of a 5.9 percent coupon bond with 15 years left to maturity and a market interest…

A: Bond is a debt instrument used to fund the operations of a business and act as a loan agreement…

Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

Question

2. Compute the intrinsic value of a 16 % coupon ,3
year maturity bond whose face value (1000B) will
be paid at the end of the maturity . The market
interest rateis forecast as 15% for the 1st and 2nd
years and ,17 % for the 3rd year.

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

VIEW

Step 2

VIEW

Step 3

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

Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
Current Yield for Annual Payments Heath Food Corporations bonds have 7 years remaining to maturity. The bonds have a face value of 1,000 and a yield to maturity of 8%. They pay interest annually and have a 9% coupon rate. What is their current yield?
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
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?
Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?