the price of regular bonds, Financial Accounting

Flying High Inc. plans to raise $5,000,000 external financing by issuing bonds, and is considering two options: regular bonds & zero couple bonds.  The regular bonds will have coupon rate at 10%, payable semi-annually, with face value of $1,000 each and maturity of 5 years.  The zero coupon bonds will be the similar as the regular bonds except that there is no coupon attached to these bonds, i.e. no interest payment throughout the life of the zero coupon bond.

Present market interest rate for 5-year bond of same bond issuers like Flying High Inc. is 8%.  Suppose there is no issuance cost.

Requirements: Show your calculation

a. Determine the price of regular bonds at the time of issuance.

b. Based on $1,000 face value for each bond, what is the minimum number of regular bonds to be issued to raise the required external financing of $5,000,000?

c. Determine the price of zero coupon bonds at the time of issuance.

 

 

Posted Date: 3/16/2013 8:48:12 AM | Location : United States







Related Discussions:- the price of regular bonds, Assignment Help, Ask Question on the price of regular bonds, Get Answer, Expert's Help, the price of regular bonds Discussions

Write discussion on the price of regular bonds
Your posts are moderated
Related Questions
Valuing Callable Bonds: Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,350. One-year interest rates

Assure  you have just  started a Mobile store. You sell mobile sets and  currencies of Airtel, Vodaphone, Reliance and BSNL.  Take five transactions  and prepare a position stateme

Illustration: Holding company with direct share holding Rain Ltd., Storm Ltd. and Thunder Ltd. are in the business of manufacturing tents. Their balance sheets as at 30 September

Q. Risk and Return - issue of debt? Raising debt finance will raise the gearing and the financial risk of the company while raising equity finance will lower gearing and financ

Richard Company had 102,000 shares of $5 par value common stock issued and outstanding before repurchasing 10,200 shares for $76,500. Richard had received $2,040,000 cash from shar

Acquisition during the financial period The holding company may acquire the subsidiary company partway through the financial period such that as at the balance sheet date, the

SECRET TRUSTS The initial basis of the doctrine of secret trusts was the refusal of equity to permit a statute to be used as an engine of fraud (e.g. Bannister v Bannister).  Cer

The concept that money has time value is one of the most fundamental notions of investment analysis. For any type of productive asset its value will based on the future cash flows

Determine the Various forms of business organizations There are various forms of business organizations: o Business-organization's objective is to earn a profit o Sole Pr

Q. Show example on Ratio calculations? The current gearing of Springbank plc = 100 × (3·5m/4m) = 87·5% Total debt after issuing $3·4m of debt = 3·5m + 3·4m = $6·9m New le