Reference no: EM131959800
Jenna bought a bond that was issued by Sherlock Watson Industries (SWI) three years ago. The bond has a $1,000 maturity value, a coupon rate equal to 9 percent, and it matures in 17 years. Interest is paid every six months; the next interest payment is scheduled for six months from today.
a. If the yield on similar risk investments is 11 percent, what is the current market value (price) of the bond?
b. Compute the capital gains yield, current yield, and total yield that Jenna will earn if she holds the bond until it matures. Assume that the market rate does not change from now until maturity.
c. Suppose that Jenna decides she wants to sell the bond seven years from today when 10 years remain until maturity. If the market rate is 8 percent at the time she sells the bond in seven years, for what price will Jenna be able to sell the bond? Compute the capital gains yield, current yield, and total yield that the new investor will earn if he or she holds the bond until it matures 10 years later. Explain why the capital gains yield is negative each year to maturity. Assume that the market rate does not change from the time Jenna sells the bond until it matures.
d. Suppose that Joan just bought a 15-year bond for $913.54. The bond has a coupon rate equal to 7 percent, and interest is paid semiannually. What is the bond's yield to maturity (YTM)? If Joan holds the bond for the next three years and its YTM does not change during that period, what return will she earn each year? What portion of the annual return represents capital gains and what portion represents the current yield?
e. Suppose that James just bought the same bond that Joan bought, but he bought it two years later for $1,034.55. If James plans to hold his bond for five years and its YTM does not change during that period, what return will he earn each year? What portion of the annual return represents capital gains and what portion represents the current yield?
please answer each one
|
What is the take away message from the course
: What is the take away message from this course regarding the identification of reliable sources of scientific information?
|
|
Discussing the capital investment decisions
: Compare and contrast up to three concepts associated with making capital investment decisions such as cash flows, sunk costs, opportunity costs, or others.
|
|
Prepare jack and jills tax return form 1040 and schedules
: Jill's father passed away during the year. Jack and Jill received $100,000 from the life insurance policy. NeitherJack nor Jill paid either of the premiums.
|
|
Describe specific types of evidence people should look for
: Describe specific types of evidence people should look for in their own ecosystem to determine whether humans are changing the local environment.
|
|
Compute the capital gains yield and current yield
: If the yield on similar risk investments is 11 percent, what is the current market value (price) of the bond?
|
|
What are the differences medicare and medicaid
: It needs to include information regarding federal and state laws governing the two different types of insurance, qualifications, and limitations of each program
|
|
What is the equilibrium expected growth rate
: The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever.
|
|
What discount rate would lead to the same npv
: What discount rate would lead to the same NPV for both projects? If the appropriate cost of capital is 10%, which project should be accepted?
|
|
Improve upon in order to stimulate creativity
: What are they list eight dimensions that could affect this relationship. Which do you think your organization can improve upon in order to stimulate creativity?
|