What is the return from holding the bond for the first year

Assignment Help Financial Management
Reference no: EM131059094

You have been asked to value a bond that has a coupon of 3.00%, a maturity of 14 years, a par value of $100,000, and a yield to maturity of 3.25%. What is the current price of the bond? In one year the bond is priced to yield 3.50%, what would be the price at that time? What is the return from holding the bond for the first year? Note: all bonds are assumed to be semi annual coupon payments unless otherwise stated.

Reference no: EM131059094

Questions Cloud

What set of lease payments will make lessee-lessor equally : An asset costs $550,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The corporate tax rate is 34 percent, and the appropriate interest rate is 10 percent. What set of lease payments will ..
What is the stocks current value per share : Thomas Brothers is expected to pay a $1.9 per share dividend at the end of the year (that is, D1 = $1.9). The dividend is expected to grow at a constant rate of 8% a year. The required rate of return on the stock, rs, is 12%. What is the stock's curr..
Compute the current price of the bond : Katie Pairy Fruits Inc. has a $1,000, 20-year bond outstanding with a nominal yield of 15 percent (coupon equals 15% × $1,000 = $150 per year). Assume that the current market-required interest rate on similar bonds is now only 12 percent. Compute the..
What is the total rate of return on the bond : Find the bond's price today and four months from now after the next coupon is paid. What is the total rate of return on the bond?
What is the return from holding the bond for the first year : You have been asked to value a bond that has a coupon of 3.00%, a maturity of 14 years, a par value of $100,000, and a yield to maturity of 3.25%. What is the current price of the bond? In one year the bond is priced to yield 3.50%, what would be the..
Is the security now discount bond or premium bond : What would be the value a 1-YEAR, $1,000 PAR VALUE BOND WITH A 10 PERCENT ANNUAL COUPON if, just after it had been issued, the expected inflation rate rose by three percentage points, caus¬ing investors to require a 13% return? Is the security now a ..
Issuing convertible debt make a firm worse off : Start by describing what convertibles are. Why would a firm choose to issue a warrant or convertible? What are the key differences between firms that issue these types of financial instruments and those that do not? In what situations could a firm be..
Bonds trading-what is the coupon rate of the bond : Beam Inc. bonds are trading today for a price of $1287.99. the bond currently has 22 years until maturity and has a yield to maturity of 5.26%. The bond pays annual coupons and the next coupon is due in one year. What is the coupon rate of the bond?
Calculate the npv of the decision to change credit policies : Credit Policy Evaluation The Harrington Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2.5 percent per period. Calculate the NPV of the decision to change credit policies.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the best estimate of stocks current intrinsic price

Decker Tires’ free cash flow for the current year equals $1.32 million. Analysts expect the company's free cash flow to grow by 30% next year, by 10% in the year after that, and at a constant rate of 5% thereafter. The WACC for this company 9.00%. De..

  Investors expect the market rate of return

Investors expect the market rate of return this year to be 12%. A stock with a beta of 1.8 has an expected rate of return of 20%. If the market return this year turns out to be 9%, what is the rate of return on the stock?

  The expected return on the market

The Stock of Big Joes has a beta of 1.48 and an expected return of 12.50 percent. The risk-free rate of return is 5 percent. What is the expected return on the market?

  Need to raise in order to build your shipping terminal

Suppose your firm needs to raise $10.5 million to construct a new shipping terminal. As CFO, you plan to raise funds in the following manner: a. 60% of the funds will be raised by selling long term debt (bonds) b. 40% of the funds will be raised by r..

  What is the expected level of sales for next year

Fort Smith Drywall expects sales next year to be $600,000 if the economy is strong, $500,000 if the economy is steady, and $300,000 if the economy is weak. The owner believes the probability of a strong economy is 20%, the probability of a steady eco..

  Define environment and general good of society

In particular do you think subjects like customer and employee safety, environment and general good of society fits in this framework or they essentially ignored?

  How much should he set aside today for purchase

Fred plans to purchase a car four years from now. The car will cost $57,325 at that time. Assume that fred can earn 8.56 percent compounded monthly on his money. How much should he set aside today for the purchase?

  What minimum yearly cash inflow

A leading producer of fine cast silver jewellery is considering the purchase of new casting equipment that will allow it to expand its product line. The up-front cost of the equipment is $750,000. The company expects that the equipment will produce s..

  More expensive excursion options

Captain Stubing of The Pacific Princess seeks to maximize the return for their scheduled 14 day tour of Europe and has a number of options available to him. He can ply his guests with alcohol, upsell them on fancier restaurant fare or include more ex..

  In the percent of sales method

In the percent of sales method:

  What would be the resultant overall company net income

If the Eastern Division is eliminated, what would be the resultant overall company net income(loss)?

  Environmental effects be dealt with when evaluating project

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air ..

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