A 30-year bond with a face value of $1000 has a coupon rate of 5.5%, with semiannual
Question:
A 30-year bond with a face value of $1000 has a coupon rate of 5.5%, with semiannual payments.
a. What is the coupon payment for this bond?
b. Draw the cash flows for the bond on a timeline.
Step by Step Answer:
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
-
A one-year discount bond with a face value of $1,000 was purchased for $900. What is the yield to maturity? What is the yield on a discount basis?
-
A recently issued industrial bond with a face value of $10,000 has a coupon rate of 8% per year, payable annually. The bond matures 20 years from now. Jeremy is interested in buying one bond. If he...
-
A 10-year, 7% coupon bond with a face value of $1,000 is currently selling for $871.65. Compute your rate of return if you sell the bond next year for $880.10.
-
An investor bought a 70-strike European put option on an index with six months to expiration.The premium for this option was 1. The investor also wrote an 80-strike European put optionon the same...
-
A 20-year annuity was purchased with $180,000 that had accumulated in an RRSP. The annuity provides a semiannually compounded rate of return of 5% and makes equal month-end payments. a. What will be...
-
In each case, assume that T is a linear transformation. (a) If T: V R and T(v1) = 1, T(v2) = -1, find T(3v1 - 5v2). (b) If T: (R and T(v1) = 2, T(v2) = -3, find T(3v1 + 2v2). (e) If T: P2 P2 and T(x...
-
List and define the four types of control. How do organizational, operations, and strategic types of control differ from one another? How do they relate?
-
The stockholders equity T accounts of I-Cards Inc. for the current fiscal year ended December 31, 2014, are as follows. Prepare a statement of stockholders equity for the fiscal year ended December...
-
The audited accounts of Wilo Ltd . for the year - end 3 1 December 2 0 2 2 , show a loss of $ 6 , 8 0 0 , 0 0 0 after charging the following: $Depreciation 1 , 7 5 0 , 0 0 0 Legal fees 1 , 6 0 0 , 0...
-
XL - B, a Canadian fast-food restaurant specializing in exotic meat hamburgers, has a central regional kitchen in which: (1) the bread is baked, (2) the meat is minced, (3) the other ingredients are...
-
Begin by finding the current U.S. Treasury yield curve. At the Treasury Web site ( www.treas.gov ), search using the term yield curve and select Daily Treasury Yield Curve Rates. Copy the most recent...
-
Suppose you have outstanding debt with an 8% interest rate that can be repaid any time, and the interest rate on U.S. Treasuries is only 5%. You plan to repay your debt using any cash that you dont...
-
Travel In Style Limited issued $1,000,000 of 9% bonds on September 1, 2020, for $1,058,671. The term of the bonds is September 1, 2020, to September 1, 2028, with interest payable quarterly each...
-
Wayward Company wants to prepare interim financial statements for the first quarter. The company wishes to avoid making a physical count of inventory. Wayward's gross profit rate averages 40%. The...
-
John Smith is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. John can buy the premium wax at a wholesale cost of $30 per tub. He...
-
Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates: Estimated market price $ Annual...
-
A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 350 units. Ending inventory at January 31 totals 150 units. Beginning...
-
At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $7,900 1,900 7,400 2,400 During Year 2, the company experienced...
-
Multiple Choice Questions 1. Zunilda is a 77-year-old individual with an AGI of $25,000 in 2016. She began living in a nursing home in 2016 upon the recommendation of her primary care physician in...
-
Per Bag Direct materials: 25 pounds of CWhiz-2000 @ $0.08/lb. = $ 2.00 Direct labor: 0.05 hour @ $32.00/hr. = $ 1.60 The company manufactured 100,000 bags of Cheese-Be-Good in December and used...
-
General Electric has just issued a callable (at par) ten-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It...
-
Boeing Corporation has just issued a callable (at par) three-year, 5% coupon bond with semiannual coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment...
-
Boeing Corporation has just issued a callable (at par) three-year, 5% coupon bond with semiannual coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment...
-
Explain by giving examples the causes of the differences between taxable income and accounting income ( 5 Marks ) b . Dolphin Company Limited has results of its operations for the year 2 0 1 4 as...
-
Navkar Corporation Limited showed the inventory stock on S ptember 3 0 , 2 0 1 7 , is R$ 7 5 , 0 0 0 . From September 1 5 to September 3 0 , the gross sales of the company were R$ 1 2 5 , 0 0 0 ;...
-
Discuss the process of creating a flexible budget. What are the key steps involved, and how does it differ from the process of developing a static budget?
Study smarter with the SolutionInn App