Calculate the yield to maturity on these bonds

Assignment Help Financial Management
Reference no: EM13882250

A bank purchased bonds for 102.5 million that has a par value of $100 million. The bonds have three years to maturity. The coupon rate is 12 percent.

a. Calculate the yield to maturity on these bonds.

b. Using your answer to part a, compute the duration of this bond.

Reference no: EM13882250

Questions Cloud

Analyze the trends that you observed with each company : Analyze the trends that you observed with each company. To what could you attribute the increases or decreases in each company's trend(s)
Additional paid-in capital refers : Additional paid-in capital refers to:
Bond-yield-plus-risk-premium method : The text identifies three methods for estimating the cost of common stock from reinvested earnings (not newly issued stock): CAPM method, DCF method, and Bond-yield-plus-risk-premium method.
What type of organizational structure is the company current : What type of organizational structure is the company currently using?
Calculate the yield to maturity on these bonds : A bank purchased bonds for 102.5 million that has a par value of $100 million. The bonds have three years to maturity. The coupon rate is 12 percent. Calculate the yield to maturity on these bonds. Using your answer to part a, compute the duration of..
Dividends on common stock : Dividends on common stock are which one of the following?
Whats the market risk premium : A stock has a beta of 1.2. The risk free rate is 5.1% and market return is 13.6%. What’s the market risk premium? What's the expected return of the stock under CAPM?
Will you use direct or indirect distribution : Discuss the company activities that will make your product or service available to your target consumer. Will you be using intensive, selective, exclusive distribution? Will you use direct or indirect distribution
Stock price for abbott based on residual income model : Abbott Lab made $2.80 net income per share last year and paid out $1.30 in dividend. The company had a book value (or equity) per share of $20.   The market has a risk free rate of 3.1% and market return 11.1%. What’s the discount rate using CAPM? Ca..

Reviews

Write a Review

Financial Management Questions & Answers

  Ice cream cart-the expected remaining life of cooling system

It will cost $3,900 to acquire a small ice cream cart. Cart sales are expected to be $3,100 a year for five years. After the five years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the pa..

  Statements is correct concerning market efficiency

Which one of the following statements is correct concerning market efficiency?

  Square box is considering two independent projects

The Square Box is considering two independent projects, both of which have an initial cost of $18,000. The cash inflows of Project A are $3,000, $7,000, and $10,000 over the next three years, respectively.

  Taste good chocolates develops a new candy bar

Taste Good Chocolates develops a new candy bar and plans to sell each bar for $1. Taste Good predicts that 1 million candy bars will be sold in the first year if the new candy bar is produced and sold, and includes $1 million of incremental revenues ..

  What is the real rate of return for large cap stocks

Large cap stocks had the nominal rates of return of 11.89%. The rate of inflation during the last year was 2.57 percent. What is the real rate of return for large cap stocks.

  Foreign taxes can be applied as credit against mncs

Tax credits A U.S.-based MNC has a foreign subsidiary that earns $250,000 before local taxes, with all the after-tax funds to be available to the parent in the form of dividends. Foreign taxes can be applied as a credit against the MNC's U.S. tax lia..

  Herbal product-cross-exchange rate implicit in forward rates

Shrewsbury Herbal Products, located in central England close to the Welsh border, is an old-line producer of herbal teas, seasoning, and medicines. The banker offers to set up a forward hedge for selling the euro receivable for pound sterling based o..

  Present and future values for different interest rates

Present and future values for different interest rates-Find the following values. Compounding/discounting occurs annually. An initial $700 compounded for 10 years at 8%.

  Project is expected to create operating cash flows

A project is expected to create operating cash flows of $22,500 a year for three years. The initial cost of the fixed assets is $50,000. These assets will be worthless at the end of the project. An additional $3,000 of net working capital will be req..

  Last payment at an annual effective rate of interest

Consider an annuity-due with 12 annual payments. The first payment is 4000 at time 0 and each subsequent payment decreases by 5%. Find the AV of this annuity 2 years after the last payment at an annual effective rate of interest i=6%.

  Expected cash flow related to this debt issue

FRN and Expected Cash Flows. A U. S. firm issues a three- year FRN with a face value of $ 250,000. The coupon is set at LIBOR plus 50 basis points and is paid annually. The coupon rate is set at the beginning of the year. The firm’s CEO notes that th..

  How do we calculate the payback period for a proposed

How do we calculate the payback period for a proposed capital budgeting project?  What are the main criticisms of the payback method?

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