How is the value of a bond determined? What is the value of a 10-year, $1,000 par
Question:
How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%?
Step by Step Answer:
dInformation provided Par value future value 1000 Time 10 years Coupon rate 10 Coup...View the full answer
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Related Video
Bond valuation is the process of determining the worth of a bond. It is based on the present value of the bond\'s future cash flows, which include coupon payments and the return of the bond\'s face value (or \"principal\") at maturity. The discount rate used in the calculation is directly tied to prevailing interest rates, and a rise in interest rates will decrease the present value of the bond and thus lower its price. Conversely, a fall in interest rates will increase the present value of the bond and raise its price. Interest rates serve as a benchmark for determining the value of a bond, as they determine the discount rate used in the bond valuation calculation. The most commonly used measure of interest rates is the yield to maturity (YTM), which represents the internal rate of return of an investment in a bond if the investor holds the bond until maturity and receives all scheduled payments. Yield to maturity is a function of the coupon rate, the current market price of the bond, the face value of the bond, and the number of years remaining until maturity. By comparing the yield to maturity of a bond to prevailing market interest rates, an investor can assess the relative value of the bond.
Students also viewed these Business questions
-
How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent? MINI CASE Sam Struthers and...
-
How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10 percent annual coupon if its required rate of return is 10 percent?
-
How is the value of a bond determined? What information is needed to perform the calculation?
-
Use f(x) and g(x) to find a formula for each expression. Identify its domain. (a) (f + g)(x) (c) (fg)(x) (b) (f- g)(x) (d) (f/g)(x)
-
Use the figure below to answer the following questions. a. What are the MPC, the MPS, and the multiplier? b. If the economy is currently in equilibrium at point a, and full employment income is...
-
Find the absolute maximum and absolute minimum values of f on the given interval. f (x) = 2x 3 - 3x 2 - 12x + 1, [-2, 3]
-
Match the measures of worth in the first column with the appropriate unit of measure that results from the analysis. Measure of Worth (a) Annual Worth (b) External Rate of Return (c) Future Worth (d)...
-
This problem is based on the 2008 annual report of Intel Corporation in the appendix. Required: a. Compute the following profitability measures for the year ended December 27, 2008: 1. Return on...
-
Use your ERD (the attached picture) to define the table structures in the database using SQL DDL commands to build your schema. Search "Oracle Built-in Datatypes" to determine the correct datatypes...
-
Using ratios to conduct financial analysis must be done with care. One year's worth of data is worth little; establishing a trend line over a period of years is the most useful approach. Using ratio...
-
How does one determine the value of any asset whose value is based on expected future cash flows?
-
(1) What would be the value of the bond described in part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return?...
-
How does the concept of continuous quality improvement differ from the concept of quality optimization?
-
21st Century Literature From the Philippines and the World Make a " Literature presentation about Armenia " here is the Content of the presentation: a. Etymology of the country(serves as...
-
Briefly explain the following. Compliance/Regulatory Requirements Gramm-Leach-Bliley Act (GLBA) Federal Deposit Insurance Corporation (FDIC) Cybersecurity Guidance Payment Card Industry Data Security...
-
How is this a metaphor "Now your in for it Bilbo Baggins," he said to himself. II You went and put your foot right in it that night of the party, and now you have got to pull it out and pay for it!"
-
Read the article "The Ethics of Corporate Social Responsibility" Respond in short to the following: What does it mean to be a good corporate citizen? Does corporate citizenship continue outside the...
-
Write the quadratic in standard form: f (x) = a(x h)+k
-
Find the first 4 terms of the recursively defined sequence a1 = 3, an + 1 = 2 + 1 van .
-
Portal Manufacturing has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11. a). Prepare a contribution margin income statement showing predicted net...
-
Suppose there were no IRS restrictions on what constituted a valid lease. Explain, in a manner that a legislator might understand, why some restrictions should be imposed. Illustrate your answer with...
-
Suppose Congress enacted new tax law changes that would (1) permit equipment to be depreciated over a shorter period, (2) lower corporate tax rates, and (3) reinstate the investment tax credit....
-
In our Anderson Company example, we assumed that the lease could not be cancelled. What effect would a cancellation clause have on the lessees analysis On the lessors analysis?
-
1C.1 What's the largest gravitational force you can produce between the two masses? (Note: it's convenient to express the forces in this sim in terms of piconewtons-pN. One piconewton is 0.000000 000...
-
1. A car has tires that have an outer diameter of 31 inches. If the wheels are turning with an angular velocity of 12 rad/s, how far in miles will the car travel in 2 hours? Enter your result rounded...
-
A figure skater spins at the end of her routine and slows down with an angular acceleration of "0.4" A per second squared. If she initially spun with a frequency of 2.35 Hz, how much time does it...
Study smarter with the SolutionInn App