What is the price of the bond

Assignment Help Finance Basics
Reference no: EM132455671

Problem: A local radio station issues a one-year zero-coupon bond. the face value is 1000. You believe that the probability of bankruptcy is 8%. The appropriate discount rate (taking into account the risk of the investment) is 1.5%.

Required:

I) What is the price of the bond?

II) What is the YTM of the bond?

III) If the 1-year risk-free rate is 1%. what is the yield spread?

Reference no: EM132455671

Questions Cloud

What is the time value of the december 110 call : The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls. The stock price was 113.25.
What must be the price of an identical call option : The stock is not expected to pay a dividend. What must be the price of an identical call option on the same stock?
Analyze effects of international diversification : Examine alternative investment vehicles. Explain how derivative securities may further enhance a portfolio's performance.
Explain premature revenue recognition : Explain premature revenue recognition. You have been advise a business-tobusiness manufacturing company how to detect fraudulent financial
What is the price of the bond : You believe that the probability of bankruptcy is 8%. The appropriate discount rate (taking into account the risk of the investment) is 1.5%.
Workman required rate of return on equity : The risk-free rate is 6% and the market risk premium is 4%. What will Workman's required rate of return on equity be after it is acquired?
What is international economic risk : What is International Economic Risk and how do firms deal with this type of risk?
Recommend appropriate action on the loan request : Springfield Bank is evaluating Creek Enterprises, which has requested a $4,000,000 loan, to assess the firm's financial leverage and financial risk
Calculate the p-l of the unhedged and hedge portfolios : Calculate the P/L of the unhedged and hedge portfolios if dy = 0.1% and dy = 2%

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the required return

The dividends are anticipated to maintain a growth rate of 4.5 percent forever. If the stock currently sells for $39.85 per share, what is the required return?

  Why are australian bond yields higher

Why are Australian bond yields higher than the US and Germany for most of the 2007-2019 period?

  Npv decision rule to evaluate projects

Calculate the NPV and use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected and why?

  What are annual credit sales

Vang, Inc., has an average collection period of 27 days. It's average daily investment in receivables is $86,000. What is the receivables turnover? What are annual credit sales?

  Calculate the simple interest for a loan

Calculate the simple interest for a loan for $24,700, for 2 1/4 years at 3.4% interest per year. Round to the nearest cent.

  How is netting used in transactions between subsidiaries

What is the important difference between international and domestic transactions? How is a letter of credit used in financing international trade transactions? How is “netting” used in transactions between subsidiaries?

  Calculate the required rate of return

How do I calculate the required rate of return? My Beta is 1.06, I have a 10 yr span with a rate of 3.37%, and 8.03% risk premium.

  Summarize the financial privacy rule and the safeguards rule

If you are like millions of other financial-service customers, concerned about what financial-service companies may do with your private data.

  What is peterson ebitda coverage ratio

It has $0.6 billion in lease payments and $0.3 billion must go towards principal payments on outstanding loans and long-term debt. What is Peterson's EBITDA coverage ratio?

  Difference between the excise duty and the sales tax

Provide brief but clear Answers the following finance question: 1. What is the difference between the excise duty and the sales tax? 2. Can a person fill a NRI in an Income tax form if he has been out of India for six months though he is Indian citiz..

  What strategy should the beef producer follow explain

The variance of monthly changes in the spot price of live cattle is (in cents per pound) 1.5. The variance of monthly changes in the futures price.

  Evaluate the present value of the introduction

What is the proper cash flow to use to evaluate the present value of the introduction of the new chip? (Enter your answer in millions.)

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