Bonds of Francesca Corporation with a par value of $1,000 sell for $920, mature in four years, and have a 9% annual coupon rate paid semiannually. Do ne round intermediate calculations. Round your answers to two decimal places. Calculate: a. current yield. % annually b. yield to maturity, to the nearest basis point. % annually c. horizon yield (or realized return) for an investor with a two-year holding period and a reinvestment rate of 8% over the period. At the end of two years, t 9% coupon bonds with two years remaining will sell to yield 9%. % annually Check My Work
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- QUESTION 2 • The following two investment options are viewed under an annual effective interest rate of i. Investment A is a 10-year zero coupon bond which redeems at par-value 250. Investment B is a perpetuity-immediate paying an annual payment starting with 4 and having each successive payment increase by K% from the previous payment. • If the volatility of each investment is 8, then find the value of K. Give your answer as a decimal rounded to two places (i.e. X.XX)...i.e. if your answer was K% = 2.54%, you would answer 2.54. ||Question 7 Olaf Limited is considering alternative sources of funds to finance its production of the non-alcohol-based hand sanitization gel. Recently, it offered a coupon bonds with maturity period of 20 years. The annual coupon rate of the bonds is 5.75% and the yield on the bonds is estimated as 7% per annum. Par value of coupon bond is $1,000 and coupon is payable annually. Required: Estimate the maximum price that an investor should pay for these corporate bonds today. Estimate the price of the bond after one year if the annual yield to maturity falls to 6%. Identify the relationship of the bond price with interest rate based on results on part a and b.How much should you pay for a 10 % annual coupon bond, with a $1,000 face value, which matures in 3 years? Assume a required return of 5%. A. $1136.16 B. $136.16 C. $863.84 D. $1000
- 26 Dry Seal plans to issue bonds to expand operations. The bonds will have a par value of P1,000, a 10-year maturity, and a coupon interest rate of 9%, paid semiannually. Current market conditions are such that the bonds will be sold to net P937.79. What is the yield-to-maturity of these bonds? Group of answer choices 10% 8% 11% 9% Assume that you wish to purchase a 30-year bond that has a maturity value of P1,000 and a coupon interest rate of 9.5%, paid semiannually. If you require a 6.75% rate of return on this investment, what is the maximum price that you should be willing to pay for this bond? Group of answer choices P1,450 P675 P1,111 P1,3523 as a financial manager, you are faced with the following options: (a) purchase a certificate of deposits that mature in 10 years and pays an interest upon maturity at the rate of 10% per annum compounded quarterly (b) purchase a zero-coupon bond that will triple your investment in the same period which option will help you to optimize your investment?D6 Finance A stock price is currently $30. During each two-month period for the next four months it is expected to increase by 8% or reduce by 6%. The annual risk-free interest rate is 6%. Use a two-step tree to calculate the value of a derivative that pays off Max[(30-Sr),0]^2 where St is the stock price in four months. If the derivative is American-style, should it be exercised early?
- QUESTION 1 Suppose that 6-month, 12 month, 18-month, 24-month, and 30-month zero rates are 4% 42 4.4% 4.6, and 4.6% per annum with contimuous compounding respectvely Etmat the cash price of a bond with a face value of 100 that will mature in 30 months and pays a coupon of 4% per anm emianniallyQUESTION 2. Compute the intrinsic value of a 15% coupon, 4-year maturity bond whoseprincipal will be repaid in equal installments after the first 2 years in which there will be no principal payment.The face value is 1000₺ and the market interest rate is forecast as 16% for the first year and 17% for the secondyear and 18% for the third year.Problem 8.9 Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 7.42 percent. If these bonds have a market price of $886.11, what yield to maturity and effective annual yield can she expect to earn? (Round answer to 2 decimal places, e.g. 15.25%.) Yield to maturity Effective annual yield % Click if you would like to Show Work for this question: Open Show Work
- Q.A $35,000, 5% bond that matures in 10 years has interest payable semiannually. If the quoted price is $36,500, what is the yield rate? Cannot use Excel or a financial calculator. Please show step by step work.QUESTION 2. Compute the intrinsic value of an 18% coupon, a 4-year maturity bond whose principal will be repaid in equal installments after a non-payment period of 2 years. The face value is 16. The market interest rate is forecast as 19% for the 1st year, 18% for the 2nd year, and 17% for the 3rd and 4th years.18 YIELD TO MATURITY AND YIELD TO CALL Kempton Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 11% annual coupon payment, and their current price is $1,185. The bonds may be called in 5 years at 109% of face value (Call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds? Why? The bond’s indenture indicates that the call provision gives the firm the right to call the bonds at the end of each year beginning in Year 5. In Year 5, the bonds may be called at 109% of face value, but in each of the next 4 years, the call percentage will decline by 1%. Thus, in Year 6, they may be called at 108% of face value; in Year 7, they may be called at 107% of face value; and so forth. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the…