Face value bond promises to make annual interest payments

Assignment Help Financial Management

Reference no: EM131020007

A 3-year, $1000-face value bond promises to make annual interest payments of $84 at the end of each year. At the end, the principal of $1000 will also be repaid. If investments of similar riskiness yield 7.4%, what is the maximum you would pay for this bond?

Reference no: EM131020007

Questions Cloud

Treasury notes are an investment security issued : Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury bill matures within one year and investors typically roll over the matured Treasury bill and purchase another Treasury bill the same day. Treasury ..

Financial markets can be categorized or grouped : Financial markets can be categorized or grouped by: Select one: a. issuance (primary vs. secondary markets) b. type of instrument (stock, bond, derivative) c. market organization (exchange or OTC). d. all of the above

What should be the price of a common stock paying : What should be the price of a common stock paying $3.50 annually in dividends if the growth rate is zero and the discount rate is 8%? Select one: a. $22.86 b. $28.00 c. $42.00 d. $43.75

At what price will the stock reach an equilibrium : A share of stock with a beta of .77 now sells for $50. Investors expect the stock to pay a year-end dividend of $3. The T-bill rate is 4%, and the market risk premium is 8%. Suppose investors believe the stock will sell for $52 at year-end. Is the st..

Face value bond promises to make annual interest payments : A 3-year, $1000-face value bond promises to make annual interest payments of $84 at the end of each year. At the end, the principal of $1000 will also be repaid. If investments of similar riskiness yield 7.4%, what is the maximum you would pay for th..

Present the propertys operating statement in good form : Bug Bastion Village, a student apartment complex, generates effective gross income of $26,000. Income tax savings are $12,500 (due to interest and depreciation expense, the owner's income tax liability for the year is $12,500 less than it would have ..

What is its effective gross income : A property has a potential gross rent of $1,500,000; operating expenses of $765,750; a vacancy allowance of $45,000, and other income of $9,000. What is its effective gross income?

What will be effective real rate of return on bank account : A bank account promises a 6.7% annual interest rate on deposits. At the same time, the rate of inflation is expected to be 2.1%. What will be the effective real rate of return on the bank account?

Cost of common equity based on the constant-growth model : You have obtained the following data for a firm: (1) Rd = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) Rf = 3.00%, RPM = 6.00%, and beta = 1.25. (3) D0 = $1.20, P0 = $35.00, and g = 6.00% (constant). You ..

User Account

All Pages