Calculate the price of each of the three bonds

Assignment Help Finance Basics
Reference no: EM13737501

BOND VALUATION Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds.
- BOND A has a 7% annual coupon, matures in 12 years, and has a $1,000 face value
- BOND B has a 9% annual coupon, matures in 12 years, and has a $1,000 face value
- BOND C has a 11% annual coupon, matures in 12 years, and has a $1,000 face value

EACH BOND HAS A YIELD TO MATURITY OF 9%

Prepare a spreadsheet using Excel in which you compute the items listed in parts a, b and d listed below. Be sure to compute the Yield-to-Maturity (YTM) and Yield-to-Call (YTC) for each years of 5,6,7,8 and 9.

A. Before calculating the prices for bonds, indicate whether each bond is trading at a premium, at a discount, or par. 

B. Calculate the price of each of the three bonds.

D. If the yield to maturity for each bond remains at 9%, what will be the price of each bond 1 year from now? What is the expected capital gains yield from each bond? What is the expected total return for each bond?

1. Provide a detailed explanation of the conclusion you reached considering whether or not to call the bond before maturity.

2. If your recommendation is to call the bond early, explain when to call the bond and your rationale.

3. List some advantages and disadvantages of using a long-term loan instead of a bond. 

Reference no: EM13737501

Estimated value of the synergistic benefits from the merger

Restful Industries has offered $12 million cash for all the ordinary shares in Sofa Distribution Pty Ltd. Based on recent market information, Sofa Distribution is worth $8 mil

Consumer knowledge of a retail pharmacy

Build a Business Plan for this proposal. Prepare the service description using your consumer knowledge of a retail pharmacy (if necessary). Of course this retail pharmacy will

What is the current stock price

Beta Corp has an ROE of 15%; has just paid a dividend of $1.50; a pays 10% of its earnings out in dividends, and the appropriate discount rate is 20%; what is the current stoc

A firm is evaluating an accounts receivable change

A firm is evaluating an accounts receivable change that would increase bad debts from 2% to 4% of sales. Sales are currently 50,000 units, the selling price is $20 per unit, a

Although vendor discounts for early payment

Although vendor discounts for early payment are very rewarding, what are some of the difficulties that may arise to keep a firm from taking advantage of those discounts? List

Return on investment at reasonable or even high stand-alone

To prepare for this Discussion, consider your organization or one with which you are familiar, and its current riskiness. Develop an idea for a new product or service that has

Research analyst working for a top portfolio

THE SITUATION: You are a Research Analyst working for a top portfolio management firm, "UMUC Portfolio Management" (in no way affiliated with the University of Maryland Univer

Crimes affecting the judicial system

Some crimes and their subsequent trials have had a lasting impact on the judicial system. Some of these have led to preventative measures to ensure that those types of crimes

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd