Problem 8-31 Valuing BondsCookie Dough Corporation has two different bonds currently outstanding. Bond M has aface value of $20,000 and matures in 20 years. The bond makes no payments for thefirst six years, then pays $1,800 every six months over the subsequent eight years, andfinally pays $2,100 every six months over the last six years. Bond N also has a face valueof $20,000 and a maturity of 20 years; it makes no coupon payments over the life of thebond. The required return on both these bonds is 10 percent compoundedsemiannually. What is the current price of Bond M and Bond N? (Do not roundintermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)Bond MBond N$69$18,451.70284.91 x

A bond provides access to debt capital from non-traditional sources such as investors for the…

Answered: Problem 8-31 Valuing Bonds Cookie Dough…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.3E: Issue Price The following terms relate to independent bond issues: 500 bonds; $1,000 face value; 8%...

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Bond Valuation and Interest Rate Risk The Garraty Company has two bond issues outstanding. Both bonds pay 100 annual interest plus 1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. a. What will be the value of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, and (3) 12%? Assume that there is only one more interest payment to be made on Bond S. b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?
Issue Price The following terms relate to independent bond issues: 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Required Assuming the market rate of interest is 10%, calculate the selling price for each bond issue.
The Garraty Company has two bond issues outstanding. Both bonds pay$100 annual interest plus $1,000 at maturity. Bond L has a maturity of15 years, and Bond S has a maturity of 1 year.a. What will be the value of each of these bonds when the going rate ofinterest is (1) 5%, (2) 8%, and (3) 12%? Assume that there is only onemore interest payment to be made on Bond S.b. Why does the longer-term (15-year) bond fluctuate more when interestrates change than does the shorter-term bond (1 year)?
Bond Valuation and Interest Rate Risk The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. What will be the value of each of these bonds when the going rate of interest is 5%? Assume that there is only one more interest payment to be made on Bond S. What will be the value of each of these bonds when the going rate of interest is 8%? Assume that there is only one more interest payment to be made on Bond S. What will be the value of each of these bonds when the going rate of interest is 12%? Assume that there is only one more interest payment to be made on Bond S. b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?
(Bond valuation relationships) Stanley, Inc. issues 10-year $1,000 bonds that pay $85 annually. The market price for the bonds is $1,034. The market's required yield to maturity on a comparable-risk bond is 8 percent. a. What is the value of the bond to you? b. What happens to the value if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 6 percent? c. Under which of the circumstances in part b should you purchase the bond? Question content area bottom Part 1 a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 8 percent? $enter your response here (Round to the nearest cent.)
The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?
Need Solutions ASAP... A 10-year, $20,000 bond was issued at a nominal interest rate of 8% with semiannual compounding. Just after the fourth interest payment, the bond will be sold. Assume that an effective interest rate of 10 (1/4)% will apply, and calculate the price of the bond. (Answer: $17,832)
14.. Fly Adventures issues bonds due in 10 years with a stated interest rate of 6% and a face value of $500,000. Interest payments are made semi-annually. The market rate for this type of bond is 5%. What is the issue price of the bonds? A. $537,194. B. $464,469. C. $538,973. D. $500,000. PV 1 2.5% 20pds .61027 PVA 2.5% 20pds 15.56816 PV 1 3% 10pds .74409 PV A 3% 20pds 14.87747
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 15-year, $1,000 par value bonds of Waco Industries pay 6 percent interest annually. The market price of the bond is $1,065, and the market's required yield to maturity on a comparable-risk bond is 4 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? nothing% (Round to two decimal places.)
6. Ellesmere Corporation issues 1 million $1 par value bonds. The stated interest rate is 6% per year and the interest is paid twice a year. What is the real interest rate of the bond? ____ A. 6% B.3% C. 12% D. (1+6%/2)2-1 10.What is the present value of $10,000 per year perpetuity at an interest rate of 5%?____ A. $10,000 B. $100,000 C. $200,000 D. None of the above Please provide formula too.

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