Pearson eText Foundations of Finance -- Instant Access (Pearson+)
10th Edition
ISBN: 9780135639382
Author: Arthur Keown, John Martin
Publisher: PEARSON+
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Chapter 7, Problem 10SP
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- a. Calculate the value of the bond.
- b. How does the value change if your required rate of return (1) increases to 9 percent or (2) decreases to 5 percent?
- c. Explain the implications of your answers in part (b) as they relate to interest rate risk, premium bonds, and discount bonds.
- d. Assume that the bond matures in 5 years instead of 15 years. Recompute your answers in part (b).
- e. Explain the implications of your answers in part (d) as they relate to interest rate risk, premium bonds, and discount bonds.
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(Bond valuation) You own a bond that pays $120 in annual interest, with a $1,000 par value. It matures in 20 years. Your required rate of return is 10
percent.
a. Calculate the value of the bond.
b. How does the value change if your required rate of return (1) increases to 15 percent or (2) decreases to 6 percent?
c. Explain the implications of your answers in part b as they relate to interest rate risk, premium bonds, and discount bonds.
d. Assume that the bond matures in 3 years instead of 20 years. Recompute your answers in part b.
e. Explain the implications of your answers in part d as they relate to interest rate risk, premium bonds, and discount bonds.
a. If your required rate of return is 10 percent, what is the value of the bond?
$
(Round to the nearest cent.)
Hi can teach me how to solve the question step by step? TQ
2. suppose that the market interest rate is 5%. calculate the present value of the following.
a. A coupon bond with an annual coupon payment of $135 and a face value of $1500 that matures in five years.
b. A discount bond with a face value of $5000 that matures in one year.
c. A fixed payment loan with annual payments of $163 that matures in three years.
b) suppose that the market interest rate is 5%. Calculate the present value of the following. Show how your answer is obtained.
i）A coupon bond with an annual coupon payment of $135 and a face value of $1500 that matures in five years.
ii) A discount bond with a face value of $5000 that matures in one years.
iii) A fixed payment loan with annual payments of $163 that matures in three years.
Chapter 7 Solutions
Pearson eText Foundations of Finance -- Instant Access (Pearson+)
Ch. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - a. How does a bonds par value differ from its...Ch. 7 - Prob. 5RQCh. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Define the expected rate of return to bondholders.
Ch. 7 - (Bond valuation) Bellingham bonds have an annual...Ch. 7 - (Bond valuation) Flora Co.s bonds, maturing in 7...Ch. 7 - (Bond valuation) You own a 20-year, 1,000 par...Ch. 7 - (Bond valuation) Calculate the value of a bond...Ch. 7 - (Bond valuation) At the beginning of the year, you...Ch. 7 - Prob. 6SPCh. 7 - (Bond relationship) Mason, Inc. has two bond...Ch. 7 - Prob. 8SPCh. 7 - (Bond valuation) National Steels 15-year, 1,000...Ch. 7 - (Bond valuation) You own a bond that pays 70 in...Ch. 7 - Prob. 11SPCh. 7 - (Bond valuationzero coupon) The Latham Corporation...Ch. 7 - (Bond valuation) Bank of America has bonds that...Ch. 7 - Prob. 15SPCh. 7 - Prob. 16SPCh. 7 - Prob. 17SPCh. 7 - (Bondholders expected rate of return) You own a...Ch. 7 - (Expected rate of return and current yield) Time...Ch. 7 - (Expected rate of return and current yield)...Ch. 7 - Prob. 21SPCh. 7 - Prob. 22SPCh. 7 - (Current yield) Assume you have a bond with a...Ch. 7 - Prob. 24SPCh. 7 - (Expected rate of return) Assume you own a bond...Ch. 7 - Prob. 26SPCh. 7 - (Bondholders expected rate of return) You...Ch. 7 - Prob. 1MCCh. 7 - Assume that the bonds are selling for the...Ch. 7 - Prob. 3MCCh. 7 - Prob. 4MCCh. 7 - Prob. 5MC
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