BUS 225 DAYONE LL
BUS 225 DAYONE LL
17th Edition
ISBN: 9781264116430
Author: BLOCK
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10, Problem 15P

For the first 20 bond problems, assume interest payments are on an annual basis.

Media Bias Inc. issued bonds 10 years ago at $1,000 per bond. These bonds had a 40-year life when issued and the annual interest payment was then 12 percent. This return was in line with the required returns by bondholders at that point in time as described next:

Chapter 10, Problem 15P, For the first 20 bond problems, assume interest payments are on an annual basis. Media Bias Inc.

Assume that 10 years later, due to good publicity, the risk premium is now 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 30 years remaining until maturity. Compute the new price of the bond.

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Tom Cruise Lines Incorporated issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 58 6 4 158 Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 25 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond t
Media Blas Incorporated issued bonds 10 years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual Interest payment was then 10 percent. This return was in line with the required returns by bondholders at that point in time as described below: Real rate of return Inflation premium Risk premium Total return 2% 4 10% Assume that 10 years later, due to good publicity, the risk premium is now 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond Answer is complete but not entirely correct. 972 72
Martin Shipping Lines issued bonds 10 years ago at $ 1,000 per bond. The bonds had a 30-year life when issued, with semiannual payments at the then annual rate of 12 percent. This return was in line with required returns by bondholders at that point, as described below: Real rate of return 2% Inflation premium 4 Risk premium 4 Total return 10 % Assume that today the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. Compute the new price of the bond. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answer to 2 decimal places.) New price of the bond $

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BUS 225 DAYONE LL

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