Total return of the bond in dollars

Assignment Help Finance Basics
Reference no: EM131044547

A 7.5 percent coupon bond with 30 years left to maturity is prices to offer a 6.5 percent yield to maturity. After one year, the issuer announce that the bond will be called in 5 years (including the year that has passed) at the price of $1200 and you believe the yield to call turns out to be 8 percent, if this occurs what's the current bond price (bond price at time point year 0)? What's the bond price in one year (bond price at time point year 1)? What's the total return of the bond in dollars if you buy the bond now and sell it in one year? The coupon will be paid semiannually

Hint: total return of the bond in dollars= bond price in one year- current bond price+ coupon received in one year.

Reference no: EM131044547

Questions Cloud

What results the food cultures in china usa and japan : Write a paper about What results the food cultures in China, U.S.A, and Japan.
How each composition reflects the six basics of melody : For each of the two videos, discuss how each composition reflects the six basics of melody, harmony, texture, rhythm, timbre, and form.
Sample coefficient of correlation : In an ANOVA table for simple linear regression, the degrees of freedom for the regression mean square is equal to: And The sample coefficient of correlation
Determine the market value proportions of debt : Determine the market value proportions of debt, preference shares and ordinary equity comprising the company's capital structure.
Total return of the bond in dollars : What's the bond price in one year (bond price at time point year 1)? What's the total return of the bond in dollars if you buy the bond now and sell it in one year? The coupon will be paid semiannually
Write a research paper on the jungle book by rudyard kipling : Write a research paper on the jungle book by rudyard kipling and i also want somebody to do my research paper on the jungle book by rudyard kipling.
Cost of equity from retained earnings : Rivoli Inc. hired you as a consultant to help estimate its cost of capital. You have been provided with the following data: D0 = $0.80; P0 = $22.50; and g = 8.00% (constant). Based on the DCF approach, what is the cost of equity from retained earn..
What apr makes these alternatives equivalent : You have a choice between receiving $1,200,000 immediately or $101,304.76 each month for a year. What APR makes these alternatives equivalent (of equal value)?
Question regarding the zero cumulative surplus : Your firm has a net cash inflow for the quarter of $75. The beginning cash balance is $35. Company policy is to maintain a minimum cash balance of $15 and borrow only the amount that is necessary to maintain that balance. How much does your firm ..

Reviews

Write a Review

Finance Basics Questions & Answers

  What is their yield to call ytc

A firm's bonds have a maturity of 21 years with a $1,000 face value, a 7 percent semiannual coupon, are callable in 4 years at $1,060, and currently sell at a price of $1,125. What is their yield to call (YTC)?

  Formulate a linear programming model

Formulate a linear programming model that can be used to determine the percentage that should be allocated to each of the possible investment alternatives.

  Percision engineering recently announced that its next

percision engineering recently announced that its next annual div will be 1.20 per share with later dividents

  Examine financial statements-prepare cash flow analysis

Given this information, find the NPV, MIRR, and which year the present value cash flows become positive. I need this in an excel spreadsheet as well as 5 slides w/ notes

  Analyzing a mixed use building

Analyzing a mixed use building

  Perform a ror analysis that provide type of cash flowsseries

Perform an ROR analysis that will provide the type of cash flowsseries and possible number of ROR values and Actual i* values determined using the ROR relation and spreadsheet function.

  Is one approach fairer to all the investors in aggregate

From your perspective as an investor, what are the pros and cons of each approach if both bonds are rated BBB by S&P and Fitch and Baa2 by Moody's? Be sure to explain the reasons you classified things as pros and cons.

  Long-term debt in the capital structure

Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because:

  What is the coupon payment

Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in oder to sell at par value? What is the coupon payment?

  Alcatel-lucent wacc

What is Alcatel-Lucent's WACC? If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the following expected free cash flows?

  Yield-to-maturity of a bond with a finite maturity

The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables except:

  What is the expected return on billing stock

Billings, Inc. common stock has a beta of 1.2. If the expected risk free return is 4% and the expected market risk premium is 9%, what is the expected return on Billing's stock?

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