Five $1,000 bonds having a bond rate of 8% per year payable quarterly are purchased for $4,940 and kept for 6 years, at which time they are sold. Determine the selling price that yields a 6% effective annual return on the investment.

Five $1,000 bonds having a bond rate of 8% per year payable quarterly are purchased for $4,940 and kept for 6 years, at which time they are sold. Determine the selling price that yields a 6% effective annual return on the investment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

See similar textbooks

Related questions

Q: Twenty $1,000 municipal bonds are offered for sale at $18,680. The bond coupon rate is 6.8% per year…

A: Nominal yield rate of the bond is the annual yield to maturity. Hence, first semiannual yield to…

Q: Midland Oil, Inc. purchased $1,000 par value bonds paying 10% interest semi-annually. The bond will…

A: Bond price is the present value of cash inflow at the given interest rate which include present…

Q: A debt of RM3,000 will mature in three years’ time. Assuming that the money is worth 14% compounded…

A: Present value = Future value / ( 1 + Periodic interest rate )Number of periods

Q: A company has made an investment in government bonds. The bonds will generate an interest income of…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: C. XY Ltd has bonds outstanding with 7 years left before maturity. The bonds are currently selling…

A: Yield to maturity refers to the internal rate of return which is earned by the investor who makes…

Q: Ten payments of 1,000 are made at the beginning of the each year for 10 years. The payments earn…

A: Time value of money is a financial management concept where the value of money today is not equal to…

Q: A $15,000 bond pays interest at 3.7% compounded semi-annually and is redeemable in 12 years. The…

A: YTM formula: YTM=2×Coupon+par-pricenpar+price2

Q: The company has made an investment in government bonds. The bonds will generate an interest income…

Q: 9. Company BOND, issued 1,000 bonds with par value of $500 and coupon rate of 10%. Interest on bonds…

A: The bonds are issued at premium when market rate is lower than the issue price of bonds payable.

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: A 9,000 bond, redeemable at par, pays interest at 5% to yield the purchaser 4%, quarterly for 2…

A: A Bond refers to an instrument that represents the loan being made by the investor to the company…

Q: Determine the market price of a $700,000, eight-year, 12% (pays interest semiannually) bond issue…

A: Details given in the question are as follows : Face value of bond = $700000 Time period = 8 years…

Q: An initial investment of $480 earns interest for 7 years in an account that earns 13% interest,…

A: Future Value = Present Value * (1+r)^n where r =rate of interest per period i.e. 13%/4 = 3.25% n =…

Q: Eight bonds were purchased for $8,628.16. They were kept for 5 years and coupon payments were…

A: Step 1 Bonds are the long term debt, having fixed rate of interest or return for a specific tenure.

Q: Computing Bond Issue Price Abbington Inc. issues $700,000 of 9% bonds that pay interest…

A: Price=Coupon amount*PVAF(YTM,n)+Redemption value*PVIF(YTM,n) YTM=8/2=4% second case ,YTM=10%/2=5%…

Q: Ahlam borrows AED 3,000,000 to be repaid over 6 years at 8 percent. What is the repayment of…

A: An annual mortgage payment is an annual payment that is to be paid for a specific period of time to…

Q: A $10,000 commercial bond that has a 6% bond rate and matures in 5 years can be purchased for…

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

Q: A Php 6,000, 5% bond with semi-annual payments, is redeemable at par at the end of 4 years to yield…

A: Bond valuation refers to the determination of different elements regarding bonds. The coupon…

Q: A debt of P10,000 with 10% interest compounded semi-annually is to be amortized by semi-annual…

A: The amount can be calculated with the help of present value of annuity function.

Q: Pearson Co issue its $154,000 at a price of 97, the stated rate is 6%, the bond term is 4 years, and…

A: Face Value of Bonds = $154000 Issue Value of Bonds = $154000 * 97% Issue Value of Bonds = $149380…

Q: A 1 million bond issue is outstanding. Assume deposits earn 8 percent per annum. Calculate the…

A: Future value required (FV) = 1,000,000 Annual interest rate (r) = 8% Number of annual deposits (n) =…

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 coupon bond is a bond that pays fixed interest payments in return to the bondholders till the…

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

A: Working note:

Q: A debt of P10,000 with 10 % interest compounded semi-annually is to be amortized by semi-annual…

A: Debt amount (PV) = P 10,000 Interest rate = 10% Semi annual interest rate (r) = 10%/2 = 5% Period =…

Q: Jiminiys cricket farm issued a 30 year.8 percent semiannual bond 3 years ago.the bond currently…

A: Pretax cost of debt is YTM of the bond

Q: Fifteen $5,000 bonds redeemable at par bearing 8% coupons payable quarterly are sold nine years…

A: Number of bonds = 15 Coupon rate = 8% (Compounded quarterly) Time period = 9 years Yield to maturity…

Q: A principal of 7000 Rial is invested at rate 9% interest for 8 years. Determine the future value if…

A: In this question future value is to be find out. Future value is the value of an asset which grows…

Q: Happy Hollow, LLC issues Ș50,000 bonds at 20% interest with quarterly interest payments. Bonds have…

A: Total Interest Received=Face Value×Interest Rate×Time

Q: 4. A company owes P 80,000, which includes the interest, to be paid one year from now. To provide…

A: At the end of a year (12 months), the total Future Value of the repayments is P =76063.59.The fund's…

Q: A $200,000 bond having a bond rate of 8% payable annually is purchased for $190,500 and kept for 6…

A: Selling price of the bond is the market price for which a bond will be sold off. The selling price…

Q: To raise capital for an expansion project, Pegasus Motors Corporation issued P5000.00, 8% bonds. The…

A: Investor shall be paid interest on the issue price of the bond i.e P5000

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 10-year $2,000 bond pays a nominal rate of 8% compounded semiannually. If the market interest rate…

A: The computation of coupon is as follows: Therefore, the bond pays $80 semiannually. The 14th…

Q: A DEBT OF P10,000.00 WITH 10% INTEREST COMPOUNDED SEMI-ANNUALLY IS TO BE AMORTIZED BY SEMI-ANNUAL…

A: Debt amount (P) = P 10,000 Annual interest rate = 10% Semi annual interest rate (R) = 10%/2 = 5%…

Q: 6) per year compounded quarterly. If John wishes to earn 8% per year compounded quarterly on the…

A: The question is based on the concept of valuation of bond with coupon payment. Formula as, V=…

Q: Issue Price of a BondAbbott, Inc., plans to issue $500,000 of ten percent bonds that will pay…

A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from…

Q: Power Solutions Ltd. issues a $15,000,000, five-year, 4.5% bond with semi-annual interest payments.…

A: Part (1) Cash received by Power on issue of Bond : Bonds Issued at Par = $15,000,000 Upfront…

Q: The 7 percent annual coupon bonds of the ABC Co. are selling for $950.41. The bonds mature in 8…

A: Yield to maturity is the rate of return a bond generates in its lifetime assuming to be held till…

Q: An investor purchased a 5%, $1000 30-year bond for $850 with 22 years to maturity. The interest was…

A: Nominal rate of interest is the rate of interest on an investment without considering the inflation…

Q: . A Php14,000 , 7% bond payable quarterly is priced to yield 8%, m=4 and redeemable at par at the…

A: The purchase price of a bond comprises of the real value of all coupon payments and maturity value…

Q: Rivera Inc. is considering the issuance of $500,000 face value, ten-year term bonds. The bonds will…

A: Bonds Payable: A bond is a debt instrument, and so it requires its issuing company to pay periodic…

Q: A $10,000 "serial" bond redeems portion of the outstanding principal randomly each year, in the…

A: Interest in 1st semester = (12%/2)*10,000 = 600 Total cashflow in 1st semester = 1000 + 600 = 1600…

Q: A debt of RM3,000 will mature in three years’ time. Assuming that the money is worth 14% compounded…

A: Present value used to state that the current value is worth more as compared to the same amount in…

Question

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

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 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

A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. What is the amount of interest the bondholders will receive at the end of the year?
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?
On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000 are to be made annually. If the company received proceeds of $112,300, how would the bonds issuance be quoted? A. 1.123 B. 112.30 C. 0.890 D. 89.05
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?
Oak Branch Inc. issued $700,000 of 5%, 10-year bonds when the market rate was 4%. They received $757,243. Interest was paid semi-annually. Prepare an amortization table for the first three years 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.