07 A $500,000 face value bond having a bond rate of 5% nominal payable semi-annuallyis purchased for $483,500 and kept for 9 years, at which time it is sold. How muchshould it sell for in order to yield a 7.5% nominal return on the investment?O $522,150O $542,487O $742,112O $575,009O $624,646

Bonds are the debt obligations of a business on which it requires to pay regular interest to the…

Answered: ould it sell for in order to yield a…

ould it sell for in order to yield a 7.5% nominal return on the investment? O $522,150 O $542,487 $742,112 O$575,009 O$624,646

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 6PROB

See similar textbooks

Related questions

Q: You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic…

A: Initial Investment $ 2,50,00,000.00 Sales revenue $ 3,00,00,000.00 Cost of goods sold $…

Q: Discuss the payback period, NPV (net present value), and IRR (internal rate of return) methods for…

A: Capital budgeting is the process of comparing the project's return to the needed return. It aids in…

Q: cost is $915 and property taxes are $2, 082 per year. Calculate their total monthly payment. REAL…

A: In mortgage loans there are monthly loan payment and also monthly insurance and property tax also…

Q: 7. What is the cost in real dollars today of spending $25,000 four years from now if your effective…

Q: Part 1 a. How much will Selma have when she retires? $enter your response here (Round to the…

A: The future value can be calculated as the sum of future values of each cash flow and the value of…

Q: Which of the following will shorten the cash cycle? Select one: A. An increase in the raw materials…

A: The answer is option D. An increase in the trade payables days

Q: What monthly payment will she be required to make if the car is financed over a period of 24 months?…

A: Loan Monthly Payments: These are payments made by the borrower to the lender for the purpose of…

Q: sty needs to have $20,000 at the end of 6 years to fulfill her goal of purchasing a small…

A: Compound interest is determined by multiplying the starting principal balance by one and then…

Q: in profit oon vou oarn on $10 500 utilizing covered interest arbitrage?

A: given r c = 4.57% r u = 2.73% arbitrage profit = amount *can/$ *(1+r c)/forward rate -(amount…

Q: D Current assets Current liabilities

A: In finance current ratio is an important financial ratio. We use this ratio to determine the…

Q: Atlantis Fisheries issues zero coupon bonds on the market at a price of $462 per bond. Each bond has…

A: Bond price (P) = $462 Face value (FV) = $1000 Years to maturity (n) = 12 Years

Q: On the first day of the year, a man deposits $4,000 in a bank at 8% per year, compounded annually.…

A: Deposit at the begining of the year is $4,000 Interest rate is 8% per year Withdrawal at the end of…

Q: Your father offers you a choice of $105,000 in 12 years or $47,000 today. If money is discounted…

A: The question is related to Time Value of money. As per time value of money present consumption is…

Q: how was the trading of UUUU company in march 2022?

A: UUUU or Energy Fuels Inc is the country's biggest maker of uranium and the main regular maker of…

Q: 20. Ron and Sandy have purchased their first house. They borrowed $174, 000 for 30 years at an…

A: Solution:- Total monthly payment will be the total payment made towards the monthly mortgage…

Q: An individual accident and health insurance policy must include O A. An automatic reinstatement…

A: In some form, every state in the US has passed the Uniform Individual Accident and Sickness Policy…

Q: On October 1, 2010, EEE Inc. issued, at 101 plus accrued interest, 800 of its 10 percent, P1,000…

A: In the given case - P1000 Bonds are dated 1st July-2010. The bonds are issued on 1st October-2010…

Q: 22. You plan to purchase a property which has an expected NOI of $200,000. You plan to borrow…

A: DCR stands for debt coverage ratio. This ratio is used to measure the ability of a project to use…

Q: USAir has $54 million of current assets and $58 million of noncurrent assets. It forecasts an EBIT…

A: (Note: We’ll answer Part D as it has been specifically asked.) Given : Current assets = $54mCurrent…

Q: Andy wants to buy a car that costs $22,750. The dealership will finance the car for 5 years, at…

A: Down payment on car = 22750*0.15 = $3412.50 Loan Amount = Cost of Car - Down payment on car = 22750…

Q: A 3/1 ARM is made for $250,000 at 7 percent with a 30-year maturity. Fixed payments are to be made…

A: Adustable Rate Mortgage is a type of mortgage in which the interest rate on th ortgage remians fixed…

Q: a coupon of 6.6 percent, a YTM of 8.35 percent, and also has 15 years to maturity. If interest rates…

A: Bond Price: It is computed by discounting all the coupon payments and the par value of the bond by…

Q: Your father offers you a choice of $105,000 in 12 years or $47,000 today. а. If money is discounted…

A: Time Value of Money: According to this basic financial concept money in the present have more value…

Q: Solve by using the sinking fund or amortization formula. Betty Price purchased a new home for…

A: Sinking fund is the method where interest payment would be paid semi annually, In this we repay the…

Q: The market price of a stock is $35.00. An investor has purchased a call option for 100 shares of…

A: Market Price of stock (Mp) = $35 Strike price or exercise price (Sp) = $20 Contract size (C) = 100…

Q: interest, compounded monthly, how much do they need to deposit each month in order to make the…

A: Future Value: It refers to the future value of a present amount and is estimated by compounding the…

Q: Bonus 2. Vanessa was hired as a government contractor out of college. As part of her benefita, she…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: n 9 n amount is deposited today, which table should be used to determine the rent that can be…

A: Future value refers to the value of an amount after a certain time period, after taking into account…

Q: Q1: Below is the population of the city in lenses taken once every 10 years. Estimated population in…

A: Solution:- Estimated population can be computed through using constant annual growth rate. We know,…

Q: Gioanni Inc., has GH¢1 million in earnings before interest and taxes. Currently it is…

A: The Capital Structure of a company refers to the proportion of debt and equity that the company uses…

Q: Atlantis Fisheries issues zero coupon bonds on the market at a price of $435 per bond. If these…

A: Call Price = Market Price * (1+Yield to call)^Years to call Yield to call = (Call price / Market…

Q: Good news! Louie has been approved for a 25-year mortgage with an 8% interest rate for the dollar…

A: Mortgage payments refer to the monthly payments made for the amount borrowed as a secured loan.…

Q: To help you structure the task, Leigh Jones has asked you to answer the following questions. 1.Why…

A: Cost of retained or reinvested earnings = (Dividend in year 1/Price of stock in year 0) + growth…

Q: 3. Suppose a certain bond sold a volume of 2, 375, 000. If the bonds sold for $824.99, calculate the…

A: Given, Meaning of a bond, Bond is an instrument of debt which is floated by the company so that…

Q: Give a short summary of 20 words about the topic "Pocket money

A: Pocket money is kind of extra money in the pocket which you can spend as per choice and enjoys.

Q: Consider BOND AAA Coupon rate: 9,4% per year Yield to maturity: 10,6% per year Settlement date: 16…

A: Coupon rate 9.4% Settlement date is 16 july 2022 Maturity date is 9 october 2048 To Find: Accured…

Q: The following financial information was provided by Anya Company: Net Income 8,255,000.00…

A: Depreciation A depreciation is a non-cash expenses for the company. The depreciation expenses is…

Q: you deposited ₱5,000 from the savings of your daily allowance in a time deposit account with your…

A: Solution:- When an amount is invested somewhere, it earns interest on it. The amount invested is…

Q: Gregor and Greta have planned to sell 300 bags together in each market. They plan to visit 24…

A: The average selling price multiplied by the number of units sold yields revenue, which is computed…

Q: Suppose the current exchange rate is $1.77/E, the interest rate in the United States is 5.08%, the…

A: Here, To Find: Part a. Forward Exchange rate =? Part b. d1 and N1 =? Part c. d2 and N2 =? Part d.…

Q: To create a fund of P1,000,000, how many deposits of P48,000 must be placed at the beginning of each…

A: Accumulated fund (AF) = P1,000,000 Monthly deposit (m) = P48,000 Monthly interest rate (r) = 0.005…

Q: 1. When you find a stock with positive alpha, you should (chapter-9 capm) • Sell the stock because…

A: As per Bartleby Honor Code, when multiple questions are asked, the expert is required only to solve…

Q: BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it…

A: The net present value and the profitability index are the methods of finding the profitability of a…

Q: Elearning Company would like to develop its technology process by purchasing a production equipment…

A: Net present value is the difference between the present value of cash inflows and present value of…

Q: As new firms enter a monopolistically competitive industry, the demand O and marginal revenue curves…

A: When a new firm enters a monopolistically competitive industry, the demand curve facing each firm…

Q: a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and…

A: Expected return refers to the return earn by an investor on the amount invested during a period of…

Q: The project to convert the infrastructure into an office complex that will generate annual revenues…

A: Cash flow considers only the cash dealt items. Since depreciation is a non-cash item, so the impact…

Q: 2. Juliet is a risk-averse investor. Romeo is a less risk-averse investor than Juliet. Therefore. •…

A: Bartleby honor code states that when multiple questions are asked, the expert is required to solve…

Q: how to implement penny stock Strategy for stock market portfilo when you invest 25,000$

A: Penny stocks are those stocks that trade under $5 per share. This is as per the SEC (Securities…

Q: 12. Consider a 25-year 6% bond selling at $70.357 with a par value of $100 to yield 9%. Using…

A: Absolute estimation error is the percentage error, which is simply difference between the two values…

Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

A $500,000 face value bond having a bond rate of 5% nominal payable semi-annually
is purchased for $483,500 and kept for 9 years, at which time it is sold. How much
should it sell for in order to yield a 7.5% nominal return on the investment?
O $522,150
O $542,487
O $742,112
O $575,009
O $624,646

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

Bond Valuation and Interest Rate Risk The Garraty Company has two bond issues outstanding. Both bonds pay 100 annual interest plus 1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. a. What will be the value of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, and (3) 12%? Assume that there is only one more interest payment to be made on Bond S. b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?
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?
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?
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.