Bond pay a higher coupon rate

Assignment Help Financial Management

Reference no: EM131183411

Assume you are evaluating whether to purchase the following $1,000 face value bonds:

Co. X bond with a 6% coupon rate that matures in 9 years.

Co. Y bond with an 11% coupon rate that matures in 7 years.

Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid annually.

Value these bonds assuming a market rate on similar risk bonds is 7% and interest is paid semi-annually.

Value these bonds assuming a market rate on similar risk bonds is 12% and interest is paid annually.

Assuming both bonds were issued at the same time, why would the Co. Y bond pay a higher coupon rate?

Reference no: EM131183411

Questions Cloud

Reaction mixture initially contains : A reaction mixture initially contains 0.228 molFeSand 0.654 mol HCl. Once the reaction has occurred as completely as possible, what amount (in moles) of the excess reactant is left?

What is the project''s payback : Winston Clinic is evaluating a project that costs $52,125 and has expected net cash inflows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent.

More volatility in cash flow and therefore price volatiilty : An issuer is trying to structure a floating rate tranche in a CMO offering. The tranche will be backed by mortgages with 8% interest rate and current balance of $2000000. Interest payable to investors in the floating rate securities (F) and investors..

What is the present value of the projects terminal value : You are the financial manager of a firm that is contemplating investing in a new project that you expect will generate cash flows of $10,000 per year for five years and then $15,000 per year for another two years. What is the present value of the pro..

Bond pay a higher coupon rate : Assume you are evaluating whether to purchase the following $1,000 face value bonds: Assuming both bonds were issued at the same time, why would the Co. Y bond pay a higher coupon rate?

What is each alternative''s irr : If the cost of capital for both methods is 9 percent, which method should be chosen? Why?

Chlorine gas according to the equation : Elemental phosphorus reacts with chlorine gas according to the equation: A reaction mixture initially contains 46.01 gP4 and 131.0 gCl2.

Price of put option necessary to guarantee your sales price : You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1,260,000. Over the past five years, the price of land in the area has increased 8 percent per year, with an annual standard deviation of 37 percent. W..

What is the firms weighted average cost of capitial : Unfortunately, the company has fallen on hard times. The 5 million shares are trading for only $4 apiece and the market value of its debt securities is 20% below face (book) value. Because of the comapny's large cumulative, it will pay no taxes on fu..

User Account

All Pages