McDonald's Corporation has 8 7/8% bonds that mature in 15 years. What is the value of a $1000 par value McDonald's Corporation bond for each of the following required rates of return assuming the investor will hold the bond to maturity assume the coupon is paid annually? a. 10.00%

McDonald's Corporation has 8 7/8% bonds that mature in 15 years. What is the value of a $1000 par value McDonald's Corporation bond for each of the following required rates of return assuming the investor will hold the bond to maturity assume the coupon is paid annually? a. 10.00%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...

See similar textbooks

Related questions

Q: mji corporation bonds mature in 6 years and have a yield to maturity rate of 8.5%. the par value of…

A: Bonds are the financial instruments that are issued by the financial institutions such as banks,…

Q: Harrimon Industries bonds have 5 years left to maturity. Interest is paid annually, and the bonds…

A: YTM is the yield to maturity. It is the return earned from a bond if holding it till maturity. Bond…

Q: Morin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon…

A: The bonds are debt financial instruments issued by corporations and governments for raising debt…

Q: aid annually, what is the value of the firm’s bond when the required rate of return is 8% and 12%?…

A: Hi, there, Thanks for posting the question. As per our Q&A honour code, we must answer the first…

Q: A firm has an issue of $1,000 par value bonds with a 12 percent stated interest rate outstanding.…

A: given, par = $1000 coupon rate = 12% n = 10 years r =8%

Q: ABC Company's bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment…

A: Par value of bond (FV) = $1000 Annual coupon amount (C) = $70 Years to maturity (n) = 7 Years Market…

Q: McDonald's Corporation has 8 7/8% bonds that mature in 15 years. What is the value of a $1000 par…

A: Bonds are the long-term debt instruments of any business which carry a fixed rate of return, and…

Q: McDonald's Corporation has 8 7/8% bonds that mature in 15 years. What is the value of a $1000 par…

A: Price of bond is equal to present value of cash flows

Q: The 8 percent annual coupon bonds of the ABC Co. are selling for $1,080.69. The bonds mature in 10…

A: cost of debt /YTM formula: YTM=coupon+par-pricenpar +price2 where, n=years to maturity

Q: Chadron Motors has 6.5 percent coupon bonds outstanding with a current market price of $695. The…

A: 1. Calculate the annual coupon amount (PMT) by multiplying the face value of the bond which is…

Q: Morin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon…

A: Bond price is the current worth of the future payments to be made. Future payments include coupon…

Q: Thatcher Corporation’s bonds will mature in 15 years. The bonds have a face value of $1,000 and a 6…

A: Using financial caluclator, N (No. of compounding periods) = 15*2 =30 PV (Price of bond) = -1100 FV…

Q: Company Prestwood has issued bonds that have a 10% coupon rate, payable annually. The bonds mature…

A: Bonds are the liabilities of the company which is issued to raise the funds required to finance the…

Q: MJI Corporation bonds mature in 6 years and have a yeild to maturity of 8.5 eprcent. The par value…

A: Time period = 6 Years × 2 = 12 semi annual periods YTM = 8.5% ÷ 2 = 4.25% Par Value = 1000 Coupon =…

Q: A companies corporate bond has 30 years left to maturity, a par value of $1,000, coupon rate of 7.5%…

A: Given:

Q: A bondholder owns 15-year goverment bonds with a $5 million face value and a 6 percent coupon that…

A: Correct answer is option (c) -27,571.

Q: Renfro rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature…

A: In the given question we require to compute the price of the bonds (PV) from below details: Face…

Q: Parkway Vold Co. Issued 14-year bonds two years ago at a coupon rate of 9.2 percent. The bond makes…

A: Borrowings are the liability of the company which is used to finance the requirement of the funds.…

Q: Hewitt Packing (HP) Inc. has an issue of $1,000 par value bonds with a 14 percent coupon interest…

A: Bond valuation is a process of determining the fair value of a bond. valuation is done using the…

Q: Blossom Inc. has seven-year bonds outstanding that pay a 10 percent coupon rate. Investors buying…

A: Let the face value of bond be $1000 Current value of bonds can be calculated using PV function in…

Q: A Baxter, Inc.'s bond has a 4 percent coupon and pays interest semi-annually. The face value is…

A: Details given are as follows: Coupon rate = 4% Face value =$1000 Current price (Present value) =…

Q: Renfro Corporation’s bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8%…

A: A financial instrument that does not affect the ownership of the common shareholders or management…

Q: Muscat Co. has an outstanding issue of bond with a par value of OMR 1,000, paying 12 % coupon rate…

A: In this question we require to compute the value of the bond from following details: Par value (Face…

Q: National Co. has outstanding bonds with an annual 8 percent coupon. The bonds have a par value of…

A: Par value = P1000 Coupon rate = 8% Annual coupon amount = 1000*0.08= P80 Years to maturity = 11…

Q: CIT plc has an outstanding issue of £1,000-par-value bonds issued 5 years ago with a 12% coupon…

A: Bonds: It is a debt instrument issued by the firm to raise capital. The issuer pays coupon payments…

Q: Kaiser industries have bonds on the market annual payment with 14 years to maturity and selling for…

A: Following details are given in the question: Current price (Present value) = $1382.01 Assume Par…

Q: . Choice Hotels International originally issued a 10 ⅜ bond in 1992. These $1,000 par value bonds…

A: The value of a Bond is equal to the sum of the present value of its annual coupon payments, and the…

Q: Atlas corporation's bonds currently sell for $1,297.58 with a coupon rate of 10% If the bonds mature…

A: The yield to maturity is generally reflective of the rate of return for investing in the bonds in…

Q: Alpha Plc.'s bonds mature at par in 10 years. The bonds pay annual coupon rate 9 percent. If the…

A: Using the rate function in excel

Q: Skyscraper Inc. has 12-year bonds outstanding with a face value of $1,000 and a market price of…

A: Calculation of coupon rate:Coupon rate is 3.75%.Excel spread sheet:

Q: Bonds of Zello Corporation with a par value of $1,000 sell for $960, mature in five years, and have…

A: Bonds are the fixed rate debt instruments used by the government or corporate to raise funds from…

Q: Smithson Co.'s Class A bonds have 10 years to go until maturity. They have a $1,000 face value and…

A: Bonds are issued by the company to meet the financial requirements of the company without losing its…

Q: Perry Inc. bonds sell at $1,150, they have a mature in 6 years, an annual coupon of $85 and par…

Q: Page Enterprise has bonds on the market making annual payments, with 9 years to maturity, and…

A: We require to calculate the coupon rate using following details in this question: Present value…

Q: price

A: The above problem can be solved using the PV function in the excel as follows: PV(rate, n, pmt, FV)

Q: BSW Corporation has a bond issue outstanding with an annual coupon rate of 7. percent paid quarterly…

A: Present value of a bond is today's value that is the current price, However Par value of the bond is…

Q: PP Inc has outstanding bonds with an annual 8% coupon. The bonds have a par value of$1000 and a…

A: YIELD TO MATURITY OF A BOND IS THE RETURN ANTICIPATED WHEN IT IS HOLD TILL MATURITY. YTM =…

Q: Choice Hotels International originally issued a 10 ⅜ bond in 1992. These $1,000 par value bonds…

A: Given information: Par value of the bond is $1,000 Number of years is 5, Coupon rate is 10(3/8) or…

Q: McDonald's Corporation has 8 7/8% bonds that mature in 15 years. What is the value of a $1000 par…

A: Bond price will be equal to par value when coupon price is equal to yield

Q: Nissan issued 20-year bonds with an annual coupon rate of 8 percent redeemed at par ($1,000). If the…

A: Given details are : Face value (Par value) of bond = $1000 Current market price = $945 Time period =…

Q: Companies are issuing bonds with a face value of $1, 280. the bonds are selling at their par value.…

A: Yield to maturity considers the coupon payment along with the price of the bond. Yield to maturity…

Q: A company's bonds have a face value of $1,000. The bonds carry a 6% coupon, pay interest…

A: Bond is a debt instrument issued by companies and government. It is a fixed income instrument which…

Question

a. 10.00%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds?
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
Current Yield for Annual Payments Heath Food Corporations bonds have 7 years remaining to maturity. The bonds have a face value of 1,000 and a yield to maturity of 8%. They pay interest annually and have a 9% coupon rate. What is their current yield?
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Waylan Sisters Inc. issued 3-year bonds with a par value of $100,000 and a 6% annual coupon when the market rate of interest was 5%. If the bonds sold at 102.438, how much cash did Williams Sisters Inc. receive from issuing the bonds?
Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. 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, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. 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 on. 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 bonds?