CORPORATE FINANCE - CONNECT ACCESS
12th Edition
ISBN: 9781264054893
Author: Ross
Publisher: MCG
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Chapter 8, Problem 17QAP
Summary Introduction
To calculate: Price of the bonds in
Introduction:
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Miller Corporation has a premium bond making semiannual payments. The bond has a
coupon rate of 9 percent, a YTM of 7 percent, and 15 years to maturity. The Modigliani
Company has a discount bond making semiannual payments. This bond has a coupon
rate of 7 percent, a YTM of 9 percent, and also has 15 years to maturity. Both bonds have
a par value of $1,000.
a. What is the price of each bond today? (Do not round intermediate calculations and
round your answers to 2 decimal places, e.g., 32.16.)
b. If interest rates remain unchanged, what do you expect the price of these bonds to be
1 year from now? In 6 years? In 10 years? In 14 years? In 15 years? (Do not round
intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
a. Price today
b.
Price in 1 year
Price in 6 years
Price in 10 years
Price in 14 years
Price in 15 years
Miller Bond
Modigliani Bond
Bond X is a premium bond making semiannual payments. The bond has a coupon rate
of 8.2 percent, a YTM of 6.2 percent, and has 15 years to maturity. Bond Y is a discount
bond making semiannual payments. This bond has a coupon rate of 6.2 percent, a YTM
of 8.2 percent, and also has 15 years to maturity. Assume the interest rates remain
unchanged and both bonds have a par value of $1,000.
a. What are the prices of these bonds today? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
b. What do you expect the prices of these bonds to be in one year? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c. What do you expect the prices of these bonds to be in three years? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
d. What do you expect the prices of these bonds to be in eight years? (Do not round
intermediate calculations and round your answers to 2…
Bond X is a premium bond making semiannual payments. The bond has a coupon rate
of 9.3 percent, a YTM of 7.3 percent, and has 18 years to maturity. Bond Y is a discount
bond making semiannual payments. This bond has a coupon rate of 7.3 percent, a YTM
of 9.3 percent, and also has 18 years to maturity. Assume the interest rates remain
unchanged and both bonds have a par value of $1,000.
d. What do you expect the prices of these bonds to be in eight years? (Do not round
intermediate calculations and round your answers to 2 decimal places, e.g.,32.16.)
e. What do you expect the prices of these bonds to be in 12 years? (Do not round
intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
f. What do you expect the prices of these bonds to be in 18 years? (Do not round
intermediate calculations.)
Bond X Bond Y
D. Price In 8 years
E price in 12 years
F price in 18 years
Chapter 8 Solutions
CORPORATE FINANCE - CONNECT ACCESS
Ch. 8 - Prob. 1CQCh. 8 - Prob. 2CQCh. 8 - Prob. 3CQCh. 8 - Yield to Maturity Treasury bid and ask quotes are...Ch. 8 - Coupon Rate How does a bond issuer decide on the...Ch. 8 - Real and Nominal Returns Are there any...Ch. 8 - Prob. 7CQCh. 8 - Prob. 8CQCh. 8 - Term Structure What is the difference between the...Ch. 8 - Crossover Bonds Looking back at the crossover...
Ch. 8 - Municipal Bonds Why is it that municipal bonds are...Ch. 8 - Prob. 12CQCh. 8 - Treasury Market Take a look back at Figure 8.4....Ch. 8 - Prob. 14CQCh. 8 - Bonds as Equity The 100-year bonds we discussed in...Ch. 8 - Bond Prices versus Yields a. What is the...Ch. 8 - Interest Rate Risk All else being the same, which...Ch. 8 - Prob. 1QAPCh. 8 - Prob. 2QAPCh. 8 - Prob. 3QAPCh. 8 - Prob. 4QAPCh. 8 - Prob. 5QAPCh. 8 - Prob. 6QAPCh. 8 - Prob. 7QAPCh. 8 - Prob. 8QAPCh. 8 - Prob. 9QAPCh. 8 - Prob. 10QAPCh. 8 - Prob. 11QAPCh. 8 - Prob. 12QAPCh. 8 - Prob. 13QAPCh. 8 - Prob. 14QAPCh. 8 - Prob. 15QAPCh. 8 - Prob. 16QAPCh. 8 - Prob. 17QAPCh. 8 - Prob. 18QAPCh. 8 - Prob. 19QAPCh. 8 - Prob. 20QAPCh. 8 - Prob. 21QAPCh. 8 - Prob. 22QAPCh. 8 - Prob. 23QAPCh. 8 - Prob. 24QAPCh. 8 - Prob. 25QAPCh. 8 - Prob. 26QAPCh. 8 - Prob. 27QAPCh. 8 - Prob. 28QAPCh. 8 - Prob. 29QAPCh. 8 - Prob. 30QAPCh. 8 - Prob. 31QAPCh. 8 - Prob. 32QAPCh. 8 - Prob. 33QAPCh. 8 - Prob. 34QAPCh. 8 - Prob. 35QAPCh. 8 - Prob. 1MCCh. 8 - Prob. 3MCCh. 8 - Prob. 5MCCh. 8 - Prob. 6MCCh. 8 - Prob. 7MC
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- Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.3 percent, a YTM of 7.3 percent, and has 18 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.3 percent, a YTM of 9.3 percent, and also has 18 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. a. What are the prices of these bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and round your answers to 2…arrow_forwardBond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.8 percent, a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.8 percent, a YTM of 8.8 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.8 percent, a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.8 percent, a YTM of 8.8 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. Bond X: Price Today Price in 1 year Prince in 3 years Price in 8 years Price in 12 years Price in 13 years Bond Y: Price Today Price in 1 year Prince in 3 years Price in 8 years Price in 12 years Price in 13 yearsarrow_forwardBond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.8 percent, a YTM of 6.8 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.8 percent, a YTM of 8.8 percent, and also has 13 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. a. What are the prices of these bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) bond X Bond Y a price today b price 1 years c price 3 yearsarrow_forward
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