CORPORATE FINANCE- ACCESS >C<
12th Edition
ISBN: 9781307447248
Author: Ross
Publisher: MCG/CREATE
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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 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…
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- ACCESS >C<
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
- Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.6 percent, a YTM of 7.6 percent, and has 13 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.6 percent, a YTM of 9.6 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.) d. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and…arrow_forwardGive typing answer with explanation and conclusion Bond A pays semi-annual coupons, pays its next coupon in 6 months, and matures in 6 years. Bond B pays annual coupons, pays its next coupon in 1 year, and matures in 10 years. Both bonds have a face value of $1,000.00 and both bonds have the same yield-to-maturity. Bond A has a coupon rate of 12.67 percent and is priced at $921.60. Bond B has a coupon rate of 8.24 percent. What is the price of bond B?arrow_forwardMiller Corporation has a premium bond making semiannual payments. The bond paysa 9 percent coupon, has a YTM of 7 percent, and has 13 years to maturity. TheModigliani Company has a discount bond making semiannual payments. This bondpays a 7 percent coupon, has a YTM of 9 percent, and also has 13 years to maturity.If interest rates remain unchanged, what do you expect the price of these bonds to bearrow_forward
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