You have $25 million to invest in only one of two bonds in the market labeled Bond A and Bond B. BOND A: Zero-coupon, market yield 6%, maturity 8 years BOND B: Coupon rate 6%, market yield 6%, maturity 10 years. Assume you have an investment horizon of one year. Your expectation is that in exactly one year, the market yields on both bands will decline from 6% to 3% and you plan on selling the bond at that time. You wish to invest in only one of the two bonds. a.How much are you willing to pay for each bond? b.Which bond would you invest in given your investment horizon and your expectations about the yields on the bonds? Assume your marginal tax rate is 36%. SHOW METHODOLOGY.

Q: At the beginning of the year, you bought a $1,000 par value corporate bond with a 6 percent annual…

A: par = $1000 coupon rate = 6% n= 10 year r=8%

Q: You have a 25-year maturity, 10% coupon, 10% yield bond with a duration of 10 years and a convexity…

A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…

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A:

Q: You are considering the purchase of a 25-year bond with a coupon rate of 11.5 percent. The bond has…

A: Price of Bond = Coupon Amount * PVA ( YTM, Term) + Face Value * PV(YTM,Term) Here  Face Value =…

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A: Given, Face value of bond is $1000 Interest rate is 9%

Q: Malenia is looking to purchase a 10-year, $10,000 face value zero coupon bond. Assuming the current…

A: Price of zero-coupon bond = Face value / (1 + r) n Wherre, r = interest rate N = Time period   a)…

Q: An investor has two bonds in his portfolio that have a face value of $1,000 and pay a 7% annual…

A: Bond price: Bond price is the current value of the future payments at a given rate of interest.…

Q: Assume you have a 1-year investment horizon and are trying to choose among three bonds. All have the…

A: Face value (F) = $1000 n = 10 years r = YTM = 8% Bond 1 coupon = 0 Bond 2 coupon (C1) = $100 Bond 3…

Q: Suppose you purchase a zero coupon bond with a face value of 10,000 maturing in 10 years, for…

A: Using the rate function in excel

Q: Assume you have a 1-year investment horizon and are trying to choose among three bonds. All have the…

A: 1. Price of shares can be calculated as : Results obtained :

Q: You are considering investing in a security that matures in 10 years with a par value of $1,000.…

A: Please find the answer to the above question below:

Q: Assume you have a 1-year investment horizon and are trying to choose among three bonds. All have the…

A: Bond price formula: bond price = par1+rt+coupon ×1-11+rtr

Q: Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon…

A: Current price of the bond is the present value of the future payments which are from bonds…

Q: If the current price of a 10-year 4.5% coupon bond which pays semiannually is $96.10, what is its…

A: Here, Face value (FV) = $100 Coupon rate = 4.5% semiannually Coupon payments (PMT) = (4.5% of 100)/2…

Q: You have just been offered a bond for $880.10. The coupon rate is 7 percent payable annually, and…

A: Using excel NPER function

Q: Bond Z is noncallable and has 20 years to maturity, a 7% annual coupon, and a $1,000 par value. Your…

A: The value of bond today is calculated by sum of present value of interest paid till maturity and…

Q: Kempton Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity.…

A:

Q: Over the next three years, the expected path of 1-year interest rates is 4, 1, and 1 percent. Today…

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Q: One of Carson City Airlines' two bonds is being considered by a businessman. Bond A offers a 7%…

A: Please find the answer to the above question below:

Q: What will the value of the Bond L be if the going interest rate is 4%? Round your answer to the…

A: Bonds are primarily the debt instruments using which a company can raise funds.     With the given…

Q: a two-year bond with $1,000 face value and 10% coupon rate is sold for $1,000 today. If one year…

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Q: You are managing a portfolio of £20 million. Your target duration is 6 years, and you can choose…

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A:

Q: You have been hired to value a new 25-year callable, convertible bond, with a $1,000 par value. The…

A: Given: Particulars Amount Callable years 25 Face value $1,000 Coupon rate 5.60%…

Q: Suppose you purchase a 30-year, zero-coupon bond with a face value of $100 and a yield to maturity…

A: Zero coupon bonds do not make coupon payments. They are generally sold at a discount and mature at…

Q: d. If your tax bracket is 30% on ordinary income and 21.4% on capital gains income, what will be the…

A: Zero coupon bonds do not pay interest during the bond period. Zero coupon bonds are issued at a very…

Q: Bond X is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1,000 par value. Your…

A: using financial calculator, Calculating Bond Price on 15-year bond at the end of year 5 N = 15…

Q: Suppose you have the choice of investing inone of the following.(a) A zero-coupon bond which costs…

A: A financial instrument that does not affect the ownership of the common shareholders or management…

Q: An insurance company must make payments to a customer of $10 million in one year and $4 million in…

A: Here, The interest rate or yield curve is 'r' Duration of payment is 't'

Q: You have paid $120 for an 5.5% coupon bond with a face value of $1,000 that matures in five years.…

A: Bond price (P0) = $120 Coupon (C) = 5.5% of $1000 = $55 Let the selling price after 1 year = P1…

Q: You are asked to invest $30 million in a bond portfolio consisting of only two bonds. Bond A has a…

A: Concept. Bond duration is way of measuring how much bond prices are likely to change if there is…

Q: Assume you have a 1-year investment horizon and are trying to choose among three bonds. All have the…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: An insurance company must make payments to a customer of £10 million in one year and £4 million in…

A: Bonds are the long-term financing measures to create debt. Interest (coupon) is paid periodically on…

Q: Suppose you purchase a 30-year, zero-coupon bond with a face value of $100 and a yield to maturity…

A:

Q: You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in…

A: The question is based on the concept of portfolio duration, which is calculated as the weighted…

Q: You are considering the purchase of a 20-year bond with an annual coupon rate of 9.5%. The bond has…

A: Bonds are the debt security which is offered or issued by the corporates or the government to…

Q: You purchase a 6%, 20-year annual coupon bond for its face value. You will hold this bond for two…

A: Return on the bond at the end of the first year  = 6% + 6% of 6                               6 +…

Q: Bond X is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1,000 par value. Your…

A: PRICE OF BOND FORMULA: price =coupon rate ×par×1-11+rnr+par1+rnwhere,r=ytmn=years to maturity

Q: Diane Carter is interested in buying a five-year zero coupon bond whose face value is $1,000. She…

A: We are given following details in the question : Face value = $1000 Market interest rate = 9% Time…

Q: You have been hired to value a new 20-year callable, convertible bond. The bond has an 8 percent…

A: Here, Coupon Rate is 8% Maturity Period of Callable Bond is 20 years Conversion Price is $50 Market…

Q: An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual…

A: We need to calculate bond price by using excel PV function. The formula is =-PV(RATE,NPER,PMT,FV)

Q: Suppose you have an investment horizon of 10 years and bought a 20-year maturity, 8% coupon bond at…

A: Total return on a callable bond Total return is calculated using cash inflows and outflows as shown…

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: