Two bonds should offer the same annual effective rate

Assignment Help Financial Management
Reference no: EM131014915

AAA firm’s semiannual bond has 12 years maturity and coupon rate of 8.75% semiannually. The firm also sells annual bonds with all the same condition except the coupon is paid annually (means ytm is the same). What is the price of this annual coupon bond?(hint: the two bonds should offer the same annual effective rate, not semi-rate * 2)

Reference no: EM131014915

Questions Cloud

What is the after-tax salvage value of the asset : An asset is used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $8,600,000 and will be sold for $1,890,000 at the end of the project. If the tax rate is 35 percent, what is the after-t..
Journalize the following merchandise transactions : Journalize the following merchandise transactions. Refer to the Chart of Accounts for exact wording of account titles.
Economy probability of state of economy portfolio return : Consider the following information: State of Economy Probability of State of Economy Portfolio Return If State Occurs Recession .20 − .16 Normal .45 .17 Boom .35 .25 Calculate the expected return. (Do not round intermediate calculations. Enter your a..
Act of fraud prove intent : Doesn't the act of fraud prove intent? [U.S. v Ebbers, 458 F.3d 110 (C.A. 2nd  2006), cert. den. 127 S.Ct. 1483 (2007)]
Two bonds should offer the same annual effective rate : AAA firm’s semiannual bond has 12 years maturity and coupon rate of 8.75% semiannually. The firm also sells annual bonds with all the same condition except the coupon is paid annually (means ytm is the same). What is the price of this annual coupon b..
Three-year bond according to the liquidity premium theory : A one-year bond has an interest rate of 3% and is expected to fall to 2.5% next year and 2% in two years. The term premium for a two-year bond is 0.3% and for a three-year bond is 0.5%. What are the interest rates on a two-year bond and three-year bo..
How much principal will be paid-off by the end of year : For the past 3 years, you have been saving $60,000 of your salary each year for a down payment on your dream house. The house is located In a nice area and is currently listed at $265,000. J.P. Morgan chase bank is willing to give you a 30 year loan ..
Find the x y coordinates of the two intersection points : Find the (x, y) coordinates of the two intersection points. Find the equations of the tangent lines to r = 770 + 770 cos(θ) at the point of intersection that lies above the x-axis.
Calculate the dividends received deductions : Calculate the dividends received deductions for each independent investment scenario assuming:

Reviews

Write a Review

 

Financial Management Questions & Answers

  Numerous methods for reducing their risk

Bankers have numerous methods for reducing their risk, such as requiring collateral for loans and imposing covenants. Yet, when recessions occur, banks usually suffer losses on loans that are not repaid. Do you think that it would be a good idea for ..

  Cash prices of six-month and one-year treasury bills

The cash prices of six-month and one-year Treasury bills are 94.0 and 89.0. A 1.5-year bond that will pay coupons of $4 every six months currently sells for $94.84. A two-year bond that will pay coupons of $5 every six months currently sells for $97...

  Calculate the annualized forward premium

Calculate the annualized forward premium or discount on six-month forward yen and calculate the profitability of each of BLP's five subsidiaries.

  Variety of performance data for individuals and teams

Predicting Winning Percentage for the NFL The National Football League (NFL) records a variety of performance data for individuals and teams (NFL website). Some of the year-end performance data for the 2005 season appear in the file named NFLStats.

  Rate of return and standard deviation of the portfolio

Suppose that a person won the Florida lottery and was offered a choice of two prizes: (1) $500,000 or (2) a coin-toss gamble in which he or she would get $1 million if a head were flipped and zero if a tail. Construct an equal Construct an equal-weig..

  Cash management system free up

Norma’s Cat Food of Shell Knob ships cat food throughout the country. Norma has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one-half days. If the com..

  Preferred dividends paid-earnings after taxes

Farah Snack Co. has earnings after taxes of $150,000. Interest expense for the year was $20,000; preferred dividends paid were $20,000; and common dividends paid were $30,000. Taxes were $22,500. The firm has 100,000 shares of common stock outstandin..

  Values for a lump sum assuming annual compounding

Find the following values for a lump sum assuming annual compounding: The future value of $500 invested at 8 percent for one year The future value of $500 invested at 8 percent for five years The present value of $500 to be received in one year when ..

  Expected to pay the dividends

Leisure Lodge Corporation is expected to pay the following dividends over the next four years: $24, $15, $5.6 and $2.8. Afterwards, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the s..

  Cash amount receivables inventory total current assets

The following is from Harrlson Incs financial statements. Sales (all on credit)were $28.50 millions for 2013 Sales to total assets 1.90 times Total Debt to Total Assets 35% Current Ratio 2.50 times Inventory Turnover 20 days Average Collection period..

  Project unit sales for seven-octave voice emulation implant

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 88,000 2 101,000 3 115,000 4 110,000 5 91,000 Production of the implants will require $1,670,000 in net working capital to st..

  What is cost of retained earnings

The common stock of Omega Corporation is currently selling for $50 per share. It is expected that Omega will pay a dividend equal to $2 per share this year. In addition, analysts have indicated that the company has been growing at a constant rate of ..

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