f2. Subject:- Finance Madsen Motors's bonds have 20 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 9%, and the yield to maturity is 10%. What is the bond'scurrent market price? Round your answer to the nearest cent.$ Nesmith Corporation's outstanding bonds have a $1,000 par value, a 9% semiannual coupon, 17 years to maturity, and a 13% YTM. What is the bond's price? Round your answer to the nearest cent.$

The market price of the bond will be the present value of the remaining coupons and the face value.

Answered: Madsen Motors's bonds have 20 years…

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 1P

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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?
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?
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Madsen Motors's bonds have 20 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 9%, and the yield to maturity is 10%. What is the bond's current market price? Round your answer to the nearest cent. $