You invest in a three year bond with a face value of $100, a yield of 4% pa and a fixed coupon rate of 7% pa, paid semi-annually. So, there are two coupons per year, paid in arrears every six months. The corporate tax rate s 30%.
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- A corporate bond has a face value of $1 000, a coupon rate of interest of 10.5% per annum, payable semi-annually, and 20 years remaining to maturity. The market interest rate for bonds of similar risk and maturity is currently 8.5% per annum.Required:i. What is the coupon payment of the bond? ii. What is the present value of the bond? iii. If the coupon payment is payable annual (based on the same information), what is the value of the bond?The company you work for is offering bonds that have a face value of $1,000 and a life of 10 years. Since $40 or 46 of the face value is paid every 6 months, the bond has a nominal or coupon rate of 8w per year. If your company paid and underwer 19 to sell the bond, which answer is closest to the effective annual interest rate that the company is paying on the bond? a. 7.160% b. 4,077% C. 4.500% d. 8.320% e. None of theseRogoff Co.'s 15-year bonds have an annual coupon rate of 9.5%. Each bond has face value of $1,000 and makes semiannual interest payments. If you require an 11% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? Select the correct answer. a. $885.66 b. $891.00 c. $888.33 d. $893.67 e. $882.99
- p. A company is offering a 8.4% bond with a current price of $765.40, the yield to maturity equals 8.55%, and the bond has a face value of $1,000. If coupon is paid twice a year, how many years are between now and the maturity of this bond? q. The YTM on a taxable bond is 7% and the YTM of a comparable municipal bond is 4%. Calculate the tax rate that will make investors indifferent between investing in either of the two bonds. r. Samantha's Cleaning Company stock currently costs $42.50 per share, considering a required rate of return of 9.5%. Project the next annual dividend, considering you know that the dividend growth rate is 5% indefinitely.A 10-year government bond has a face value of £100 and an annual coupon rate of 5%. Assume that the interest rate is equal to 6% per year. (a) Calculate the bond’s present value if it pays the interest annually, and also the present value if it pays semi-annually. (b) Calculate the market price of the bond when the interest rate changes to 8% please explain it on a paper with formula, not by excel.A newly issued bond pays its coupons once annually. Its coupon rate is 5%, its maturity is 20 years, and its yield to maturity is 8%.a. Find the holding-period return for a 1-year investment period if the bond is selling at a yield to maturity of 7% by the end of the year.b. If you sell the bond after one year, what taxes will you owe if the tax rate on interest income is 40% and the tax rate on capital gains income is 30%? The bond is subject to original-issue discount tax treatment.c. What is the after-tax holding-period return on the bond?d. Find the realized compound yield before taxes for a 2-year holding period, assuming that (i) you sell the bond after two years, (ii) the bond yield is 7% at the end of the second year, and (iii) the coupon can be reinvested for one year at a 3% interest rate.e. Use the tax rates in part (b) to compute the after-tax 2-year realized compound yield. Remember to take account of OID tax rules.
- You are considering a 10-year, $1,000 par value bond. Its couponrate is 8%, and interest is paid semiannually. If you require an “effective” annual interestrate (not a nominal rate) of 7.1225%, how much should you be willing to pay forthe bond?A 14-year, $1,000 par value Fingen bond pays 6% interest annually (assume semi- annual payments). The price of the bond is $1,100 and the market's required yield to maturity on a comparable-risk bond is 5.50%. a. Compute the bonds yield to maturity. b. Determine the value of the bond to you, given your required rate of return (the YTM on a comparable-risk bond). c. Should you purchase the bond? a. b. Coupon rate Par (FV) Years (n) m PMT PV (price) YTM Coupon rate Par (FV) Years (n) m PMT PV (price) YTM 6.0% $1,000 14 2 $30 Calculation $1,100 6.0% $1,000 14 2 $30 Calculation Note: if you want PV to be a positive number, you must use a minus sign for both pmt and FV 5.50%Fingen's 14-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $1,100 and the market's required yield to maturity on a comparable-risk bond is 6 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond?
- The one-year interest rates over the next three years are expected to be 5%, 4.5%, and 4%, Investors' preferences for holding short-term bonds have the liquidity premiums for one-year to three-year bonds as 0%, 0.2%, and 0.35%, respectively. What is the interest rate on a two-year bond? O a. 4.5% O b. 4.75% O c. 4.95% O d. 5.1% O e. 5.3%Fingen's 11-year, $1,000 par value bonds pay 11 percent interest annually. The market price of the bonds is $1,110 and the market's required yield to maturity on a comparable-risk bond is 8 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond?A bond is issued with a coupon of 4% paid annually, a maturity of 39 years, and a yield to maturity of 7%. What rate of return will be earned by an investor who purchases the bond for $602.05 and holds it for 1 year if the bond's yield to maturity at the end of the year is 9% ? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)