As an investor you are considering an investment in the

Assignment Help Corporate Finance

Reference no: EM13363771

As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 9.5% on a face value of $1,000. Currently, the bonds are selling for $872.

a. If you required return is 11% for bonds in this risk class, what is the highest price you would be willing to pay? (Hint: Use the PV function)

b. What is the yield to maturity on these bonds if you purchase them at the current price? (Hint: Use the RATE function)

c. If the bonds can be called in three years with a call premium of 4% of the face value, what is the yield to call on these bonds? (Hint: Use the RATE function)

d. Now assume that the settlement date for your purchase would be 7/30/2004, the maturity date is 7/28/2012, and the first call date is 7/29/2007. Using the PRICE and YIELD functions, recalculate your answers to Parts a, b, and c.

e. If market interest rates remain unchanged, do you think it is likely that the bond will be called in three years? Why or why not?

f. Prepare a chart that shows the relationship of the bond's price to your required return. Use a range of 0% to 15% with 0.5% increments in calculating the prices.

Reference no: EM13363771

Questions Cloud

Consider the statement the best standards are the ones that : consider the statement the best standards are the ones that eliminate all management discretion in reporting. that way

Coca-cola and pepsi are both very profitable soft drinks : coca-cola and pepsi are both very profitable soft drinks. inputs for these products include sugar bottlescans and soft

Would you as a financial manager be interested in doing : would you as a financial manager be interested in doing business in this countrybrunei?as such your research analysis

Describe how the capm assists in calculating the weighted : describe how the capm assists in calculating the weighted average costs of capital wacc and its components.illustrate

As an investor you are considering an investment in the : as an investor you are considering an investment in the bonds of the conifer coal company. the bonds which pay interest

Consider the spot pound and the 90-day forward pound are : consider the spot pound and the 90-day forward pound are both selling for 1.65 while the u.s. interest rates are 10

At the end of 2012 omega corporation was considering : at the end of 2012 omega corporation was considering undertaking a major long-term project in an effort to remain

Scoto manufacturing is a matter firm in the machine tool : scoto manufacturing is a matter firm in the machine tool component industry the firms most recent common stock dividend

1 you are considering investing in a company that : 1. you are considering investing in a company that cultivates abalone for sale to local restaurants. use the following

User Account

All Pages