Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 10 percent annual interest. The current yield to maturity on such bonds in the market is 7 percent. Compute the price of the bonds for these maturity dates: a. 30 years. b. 15 years. с. 1 year.

Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 10 percent annual interest. The current yield to maturity on such bonds in the market is 7 percent. Compute the price of the bonds for these maturity dates: a. 30 years. b. 15 years. с. 1 year.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 9PROB

See similar textbooks

Related questions

Q: Stanley, Inc. issues 20-year $1,000 bonds that pay $80 annually. The market price for the bonds…

A: Given information: Face value : $1000 Coupon payment : $80 Time period : 20 years Yield to maturity…

Q: The Desreumaux Company has two bonds outstanding. Both bonds pay $100 annua interest plus $1,000 at…

A: Calculation of Value of Bond: Excel Spreadsheet: Excel Workings:

Q: The Mills Company had issued a bond 10%, 10 year bonds with a face value of P1,000 each and paying a…

A: Bonds are the financial instruments that are issued by corporations for acquiring capital and funds…

Q: The Pioneer Petroleum Corporation has a bond outstanding with an $80 annual interest payment, a…

A: Annual coupon payment (C) = $ 80 Market price (P) = $ 900 Par value (F) = $ 1,000 Years to maturity…

Q: A bond of Telink Corporation pays $120 in annual interest, with a $1,000 par value. The bonds…

A: Here, Annual coupon payment = $120 Par Value = $1,000 Time period = 15 years Yield to maturity = 8%…

Q: O'Shea Inc. Issued bonds at a face value of $100,000, a rate of 6%, and a 5-year term for $98,000.…

A: Amortization of Bonds discount or premium: The Bonds can be issued at a discount or premium. The…

Q: payment of 1 for

A: The correct is .. d) A bond can be issued at premium or discount based on the market interest…

Q: Bonds issued by Fresh Farm Company have a par value of $1,000, which is also the amount of principal…

A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…

Q: BSW Corporation has a bond issue outstanding with an annual coupon rate of 7 percent paid quarterly…

A: Fair value of bond = present value of future cashflows of bond, which is given by, Fair value =…

Q: Beluga Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the…

A: Bonds Payable: Bonds Payable are the financial instruments that are issued with a promise or…

Q: At the beginning of current year, Colt Company issued ten-year bonds with a face amount of…

A: A bond can be issued at premium or discount based on the market interest rate. If the market…

Q: A company has issued 10-year bonds, with a face value of $1,000,000, in $1,000 units. Interest at 8%…

A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…

Q: Ocean Adventures issues bonds due in 10 years with a stated interest rate of 10% and a face value of…

A: Bond is a debt instrument issued by companies and government. It is a fixed income instrument which…

Q: ABC Corporation issued P1,000,000 in 8% bonds, maturing in ten years and paying interest…

A: Face Value of bonds = 1,000,000 Coupon rate = 8% N = 20 semi annual periods (10 years) Bonds issued…

Q: what will be the issuance price (approximate) of the bonds?

A: Interest payable on the bond for every 6 months = 9000 (300000*6%*6/12) Calculation of present value…

Q: Allington Corp. issues $560,000 of 9% bonds that pay interest semiannually and mature in 10 years.…

A: Issue price of the bonds = Present value of principal + Present value of interest payments where,…

Q: On July 1, Somers Inc. issued $300,000 of 10%, 10-year bonds when the market rate was 12%. The bonds…

A: Issue price of bonds refers to the price at which the bonds are actually issued.

Q: MJI Corporation bonds mature in 6 years and have a yeild to maturity of 8.5 eprcent. The par value…

A: Time period = 6 Years × 2 = 12 semi annual periods YTM = 8.5% ÷ 2 = 4.25% Par Value = 1000 Coupon =…

Q: Park Corporation is planning to issue bonds with a face value of $620,000 and a coupon rate of 7.5…

A: Issue price = present value of coupon payments + present value of face value of bond Coupon amount…

Q: Kilgore Natural Gas has a $1,000 par value bond outstanding that pays 19 percent annual interest.…

A: A bond is a financial security issued by a corporation to obtain borrowing funds for a long-term…

Q: Navistar Electric issued 1000 debenture bonds 5 years ago with a face value of $5,000 each and a…

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

Q: A company issues a $100,000 bond due in 4 years paying 7 percent interest annually at year- end.…

A: We require to calculate the present value of bond in this question. We can calculate the present…

Q: Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 10 percent annual interest.…

A: Using excel PV function

Q: Compute the selling price of 8%, 10-year bonds with a par value of $250,000 and semiannual interest…

A: Selling/Issue price of the bonds = Present value of principal + Present value of interest payments…

Q: On January 1 of this year, Ikuta Company issued a bond with a face value of $300,000 and a coupon…

A: Solution: Introduction: A bond is an instrument of financial indebtedness of a bond issuer company…

Q: Krystian Inc. issued 8-year bonds with a face value of $100,000 and a stated rate of 5% when the…

A: Answer A) Calculation of Total Amount to be received over the Bond Period Total Amount to be…

Q: Blue Co. holds the following bonds which all have a yield to maturity of 15% and matures in 10…

A: Coupon rate of XYZ = YTM of XYZ = 15% Face value = P 5000 Total return required on XYZ sale = 18%…

Q: Park Corporation is planning to issue bonds with a face value of $4,000,000 and a coupon rate of 7…

A: Given information Bond face value = $ 4,000,000 Coupon rate = 7% [ per period = 3.5% ] Market…

Q: Bushman, Inc., issues $200,000 of 9% bonds that pay interest semiannually and mature in 10 years.…

A: Future value is the value of an invested cash on a particular date which is equivalent to the value…

Q: O Corp issues 5%, 20-year bonds with a total face amount of $1,000,000. The market interest rate for…

A: The issue price of bonds will be present value of maturity amount and present value of interest at…

Q: Pearson Co issue its $193,400 at a price of 103, the stated rate is 9%, the bond term is 4 years,…

A: Solution: Annual interest payment on bond = Face value of bond * Annual stated interest rate

Q: At the beginning of current year, Marble Co. issued 10-year bonds with a face amount of P 5,000,000…

A: Total PV of bonds at the time of issuance = PV of Annual Interest Payments + PV of Redemption Value…

Q: Newport Industries issued ten-year, $100,000 bonds paying semi-annual interest. When the annual…

A: Bonds are the debt securities which are issued by the organizations whether private or government.…

Q: Compute the selling price of 10%, 15-year bonds with a par value of $240,000 and semiannual interest…

A: Bond: It can be defined as a financial instrument of indebtedness that reflects a loan made by the…

Q: A company has issued 10-year bonds, with a face value of $1,000,000 in 1,000 dollar units. Interest…

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

Q: Preston Corporation has a bond outstand with $110 annual interest payment , market price of $1,200,…

A: Yield to maturity (YTM) is the rate which an investor earns when the bond is held till its maturity.

Q: Notting Hill Berhad issued 25-year bonds three years ago. The bonds are currently selling for 97…

A: Face value (F) = RM 1000 Let the coupon rate = c% Coupon (C) = (c% of 1000) / 4 = 2.5c YTM = 9%…

Q: Neubert Enterprises recently issued $1,000 par value 15-year bonds with a5% coupon paid annually and…

A: Bonds with warrants gives the bond holder the right to buy the shares of the company that issues the…

Q: BSW Corporation has a bond issue outstanding with an annual coupon rate of 7. percent paid quarterly…

A: Present value of a bond is today's value that is the current price, However Par value of the bond is…

Q: James Corporation is planning to issue bonds with a face value of $501,000 and a coupon rate of 6…

A: Solution a: Computation of bond price Table values are based on: n= 14 i= 2.00%…

Q: Blue Co. holds the following bonds which all have a yield to maturity of 15% and matures in 10…

A: Bond XYZ Coupon = Annual Rate * Face Value = 15%*5000 = 750 YTM = Annual Rate = 15% N = 10

Q: MJI Corporation bonds mature in 6 years and have a yield to maturity of 8.5 percent. The par value…

A: Given, Face Value (FV)=$1,000No. of paymrnts (n)=6×2=12Payment (pmt)=$1,000×10%×12=$50Rate…

Q: Concord Inc. issues $ 2,300,000 of 7% bonds due in 12 years with interest payable at year-end. The…

A: Value of bond is the present value of the future coupon payments and the present value of the bond…

Q: Crane Company is about to issue $390,000 of 6-year bonds paying an 12% interest rate, with interest…

A: Sale proceeds from issue of bonds = Interest Payment x PVIAF (13%, 6 years) + Face value of the…

Question

Bond value
5. Essex Biochemical Co. has a $1,000 par value bond outstanding that pays
(LO3)
10 percent annual interest. The current yield to maturity on such bonds in
the market is 7 percent. Compute the price of the bonds for these maturity
dates:
а.
30 years.
5 years.
1 year.
b.
15 y
с.

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

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

On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity date. Interest is to be paid semi-annually and the market rate of interest is 8%. If the bonds sold at 113.55, what amount was received upon issuance?
Beluga Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 3% when the market rate was 4%. Interest was paid annually. The bonds were sold at 87.5. What was the sales price of the bonds? Were they issued at a discount, a premium, or at par?
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?
Issue Price The following terms relate to independent bond issues: 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Required Assuming the market rate of interest is 10%, calculate the selling price for each bond issue.
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?
OShea Inc. issued bonds at a face value of $100,000, a rate of 6%, and a 5-year term for $98,000. From this information, we know that the market rate of interest was ________. A. more than 6% B. less than 6% C. equal to 6% D. cannot be determined from the information given.
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
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?