What is the trading price of the bond

Assignment Help Financial Management

Reference no: EM132050005

Venture Corp issued 7 year 5% bonds due 2024 at par. This bond pays interest on a semi-annual basis. However, right after Venture issued the bonds, the Company seriously missed its first earnings and at the same time, the interest rate environment changed.

Now the market's required return has increased to 10% (all else being equal). In this current environment, what is the trading price of the bond? Is this bond trading at a discount or premium?

Now suppose you find out that the Venture Corp bonds are callable in 3 years at 103% (or $1030).

Assuming the trading price you found above, what is the bond's yield to call? Is the yield to call or yield to maturity higher? Why?

(Hint: the yield to call is the yield you get if you hold the bond until the call date and redeem the call price)

Reference no: EM132050005

Questions Cloud

Which projects should empire accept : Project A has a rate of return of 11%, and Project B's return is 9%. These two projects are equally risky and about as risky as the firm's existing assets.

What is their weighted average cost of capital : Their tax rate is 31%, and their costs of debt and equity are 8% and 12% respectibviely. What is their weighted average cost of capital?

What is the maximum amount it can lose : If the bank does hedge with the forward contract, what is the maximum amount it can lose?

How much does venus need to invest per year to reach : Venus wants to have $30,000 in her taxable account at the end of 10 years. Her account will earn 6% annually.

What is the trading price of the bond : Assuming the trading price you found above, what is the bond's yield to call? Is the yield to call or yield to maturity higher? Why?

Should vincent buy the painting : The current sale price of the painting is 100 dollars. The resale price of the painting after T years is 100 + T dollars, where T is a positive integer.

Which financing method should be selected by fosbeck : If the VC agrees to invest in Pharmaset, it plans to exit after eight years at which time it expects that the company's value would be eight times its year 8 .

Calculate the project s npv and irr : The firm's total cost to make each cane, not including depreciation, is $9 per cane, and this cos is expected to remain unchanged over the life of the project.

Identify advantage of mutual funds and etfs for investors : Avoid duplicating a fund posted by a classmate. Identify one advantage and one disadvantage of mutual funds and ETFs for investors.

User Account

All Pages