The bond yield to maturity at the end of the year

Assignment Help Financial Management
Reference no: EM131354464

A bond that pays coupons annually is issued with a coupon rate of 4.1%, maturity of 25 years, and a yield to maturity of 7.1%. What rate of return will be earned by an investor who purchases the bond and holds it for 1 year if the bond’s yield to maturity at the end of the year is 8.1%? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131354464

Questions Cloud

Calculate the price of a two-year european put option : The current price of Natasha Corporation stock is $6. In each of the next two years, this stock price can either go up by $2.50 or go down by $2. Using the Binomial Model, calculate the price of a two-year call option on Natasha stock with a strike p..
Would you expect this to cause call price to rise or fall : A stock trades for $45 per share. A call option on that stock has a strike price of $50 and an expiration date one year in the future. The volatility of the stocks return is 30%, and the risk-free rate is 2%. What is the Black and Scholes value of th..
Bank compounds interest annually : Assume that it is now january 1, 1997. On january 1, 1998, you will deposit $1,000 in to a savings account that pays 8 percent. If the bank compounds interest annually, how much will you have in your account on january 1, 2001? What would your januar..
The bond yield to maturity at the end of the year : A bond that pays coupons annually is issued with a coupon rate of 4.1%, maturity of 25 years, and a yield to maturity of 7.1%. What rate of return will be earned by an investor who purchases the bond and holds it for 1 year if the bond’s yield to mat..
Company issued new securities in the same proportion : Pardon Me, Inc., recently issued new securities to finance a new TV show. The project cost $13.1 million, and the company paid $635,000 in flotation costs. If the company issued new securities in the same proportion as its target capital structure, w..
The market price of home depot stock rises : A six-month call option contract on 100 shares of Home Depot common stock with a strike price of $60 can be purchased for $600. Assuming that the market price of Home Depot stock rises to $75 per share by the expiration date of the option, what is th..
Project with the loan subsidy combined with equity : Blue Gills Corporation is looking to build a toll road in Iowa. The initial investment in paving equipment is $81 million. The equipment will be fully depreciated using the straight-line method over its economic life of ten years. What is the value o..
What is the capitalization rate : What is the capitalization rate? what is the value of the subject property by the direct capitalization technique?

Reviews

Write a Review

Financial Management Questions & Answers

  Describe the average and marginal tax rates

Describe the average and marginal tax rates. Explain which rate is most relevant if your income is increasing and why it is the relevant rate.

  Determine the net annual financing cost

DuBois Apparel Company is considering factoring its receivables.- Determine the net annual financing cost of this factoring arrangement.

  Introduce new portable camper to fill out its product line

Winnebagel Corp. currently sells 23,000 motor homes per year at $61,000 each, and 8,500 luxury motor coaches per year at $98,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 18,000 of these..

  How each amount in the flexible budget was calculated

Here are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars): Explain how each amount in the flexible budget was calculated. What do the Part B results tell Brandon’s managers about the surgery cente..

  Information provided prepare the operating budgets

Based on the information provided prepare the following operating budgets for 2015: Sales, Production, Direct Material, Direct Labor, Manufacturing Overhead, Ending Inventory, Cost of Goods Sold, Selling, General and Administrative Budgets, and a Bud..

  How would you calculate the spot rate of bond

How would you calculate the spot rate of bond?

  What is your estimate of the stock current price

A company currently pays a dividend of $3.75 per share (D0 = $3.75). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, and then at a constant rate of 7% thereafter. The company's stock has a beta of..

  Refinancing the outstanding mortgage balance at lower rate

Assume a 25-year, $490,000 mortgage with a rate of 7.2 percent. 9 years into the mortgage, rates have fallen to 6.2 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate?

  What is the initial margin requirement-margin loan amount

You purchase 800 shares of 2nd Chance Co. stock on margin at a price of $37. Your broker requires you to deposit $15,000. What is your margin loan amount? What is the initial margin requirement?

  What is the retailers effective cost of trade credit

Cost of Trade Credit A large retailer obtains merchandise under the credit terms of 3/10, net 35, but routinely takes 50 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) Wha..

  Considering the replacement

Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $24,000 to $54,000 per year. The new machine will cost $85,000, and it will have an estim..

  Existing credit card and make no subsequent payments

You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of 3.7 percent per year, compounded monthly for the first six months, increasing thereafter to 18.6 percent compounded monthly. Required: Assuming y..

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