Snowbirds Resort, Inc. has a chain of facilities located in the southern part of the United...

  
 

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Snowbirds Resort, Inc. has a chain of facilities located in the southern part of the United States that caters to clients who generally live in northern states who want to escape the cold of winter. To finance their operations, the company offers a mix of investment bonds and stock offerings. In order to entice investors to the company, management needs to provide information on the performance of the bonds offered, as well as predictions for stock valuation. Two new bonds are being offered to investors. One bond has a 10 year maturity, and the second has a 30 year maturity. Management has asked you to write up the data on the bonds so that it can be distributed as part of the investor package. This information for each of the bonds includes the number of periods until it is callable, the periodic yield, annual coupon rate, and other areas of interest for investor evaluation. The information for each bond is outlined below. Directions: For each of the bonds, calculate the data for each item criteria outlined below. Enter your data to the blue cells. Use Excel to aid you with your calculations and refer to the provided "Hints" for your calculations. Answer the Analysis Question once all calculations have been completed. Bond # 1: 10 Year Maturity Bond #1 is a 10 year, 4.5% semiannual coupon bond. It has a par/face value of $5,000 and may be called in 6 years at a call price of $7,500. The bond sells for $5,250. Complete the information in the table below. Bond Information Years to maturity: Periods per year: Periods to maturity: Coupon rate: Par/face value: Periodic payment: Current price Call price: Years till callable: Periods till callable: 10 2 20 4.5% $5,000 $112.50 $5,250 $7,500 6 12 Formulas How long it is for Number of times it pays interest number of years x number of payment periods 25 years x 2 period Your interest rate Face value...aka the value of the bond Par value x (coupon rate / periods per year) Sale price Amount paid should the bond be called early... aka the person using the bond money pays their loan off early When they can call it in, meaning pay you the $6000 for it number of years x number of periods Based on the bond information above, calculate the following information for Bond #1: Periodic Yield to Maturity - Annual Yield to Maturity = Annual Coupon Rate = Current yield = Periodic Yield to Call = Annual Yield to Call = Bond #2: 30 Year Maturity Bond Information Years to maturity: Periods per year: Periods to maturity: Coupon rate: Par/face value: Periodic payment: Current price Call price: Years till callable: Periods till callable: 30 2 6.25% $3,000 Hints: Try using rate function of Excel and enter periods to maturity, periodic payment, negative current price, par value; this is the yield for each period you own the bond $3,000 $7,500 10 Use your periodic yield to maturity and the periods per year; this is your yield for each year Bond #2 is a 30 year, 6.25% semiannual coupon bond. It has a par/face value of $3,000 and may be called in 10 years at a call price of $7,500. The bond sells for $3,000. Complete the information in the table below. This is a dollar value, not a percent; the payment amount you can expect each year Ann. Coupon Rate / Current Price; yield based on current conditions Try using the RATE function of Excel Use your periodic yield to call x periods per year, this is your yield for each year until the bond is callable Formulas How long it is for Number of times it pays interest number of years x number of payment periods 25 years x 2 period Your interest rate Face value... aka the value of the bond Par value x (coupon rate / periods per year) Sale price Formulas using rate function, enter periods to maturity, periodic payment, negative current price, par value Amount paid should the bond be called early... aka the person using the bond money pays their loan off early When they can call it in, meaning pay you the $6000 for it number of years x number of periods Periodic yield to maturity x periods per year. Periodic payment x periods per year Ann. Coupon / Current Price Rate function using: periods to call, periodic payment, negative current price, call price Periodic yield to call x periods per year Based on the bond information above, calculate the following information for Bond #1: Periodic Yield to Maturity = Annual Yield to Maturity - Annual Coupon Rate = Current yield = Periodic Yield to Call = Annual Yield to Call = Hints: Try using rate function of Excel and enter periods to maturity, periodic payment, negative current price, par value; this is the yield for each period you own the bond Use your periodic yield to maturity and the periods per year; this is your yield for each year This is a dollar value, not a percent; the payment amount you can expect each year Ann. Coupon Rate / Current Price; yield based on current conditions Try using the RATE function of Excel Use your periodic yield to call x periods per year, this is your yield for each year until the bond is callable Formulas using rate function, enter periods to maturity, periodic payment, negative current price, par value Periodic yield to maturity x periods per year Periodic payment x periods per year Ann. Coupon / Current Price Rate function using: periods to call, periodic payment, negative current price, call price. Periodic yield to call x periods per year Analysis Question: In your opinion, which bond is the better purchase for investors? Why do you feel it is the better purchase? Explain your answer using a minimum of 3 sentences. Snowbirds Resort, Inc. has a chain of facilities located in the southern part of the United States that caters to clients who generally live in northern states who want to escape the cold of winter. To finance their operations, the company offers a mix of investment bonds and stock offerings. In order to entice investors to the company, management needs to provide information on the performance of the bonds offered, as well as predictions for stock valuation. Two new bonds are being offered to investors. One bond has a 10 year maturity, and the second has a 30 year maturity. Management has asked you to write up the data on the bonds so that it can be distributed as part of the investor package. This information for each of the bonds includes the number of periods until it is callable, the periodic yield, annual coupon rate, and other areas of interest for investor evaluation. The information for each bond is outlined below. Directions: For each of the bonds, calculate the data for each item criteria outlined below. Enter your data to the blue cells. Use Excel to aid you with your calculations and refer to the provided "Hints" for your calculations. Answer the Analysis Question once all calculations have been completed. Bond # 1: 10 Year Maturity Bond #1 is a 10 year, 4.5% semiannual coupon bond. It has a par/face value of $5,000 and may be called in 6 years at a call price of $7,500. The bond sells for $5,250. Complete the information in the table below. Bond Information Years to maturity: Periods per year: Periods to maturity: Coupon rate: Par/face value: Periodic payment: Current price Call price: Years till callable: Periods till callable: 10 2 20 4.5% $5,000 $112.50 $5,250 $7,500 6 12 Formulas How long it is for Number of times it pays interest number of years x number of payment periods 25 years x 2 period Your interest rate Face value...aka the value of the bond Par value x (coupon rate / periods per year) Sale price Amount paid should the bond be called early... aka the person using the bond money pays their loan off early When they can call it in, meaning pay you the $6000 for it number of years x number of periods Based on the bond information above, calculate the following information for Bond #1: Periodic Yield to Maturity - Annual Yield to Maturity = Annual Coupon Rate = Current yield = Periodic Yield to Call = Annual Yield to Call = Bond #2: 30 Year Maturity Bond Information Years to maturity: Periods per year: Periods to maturity: Coupon rate: Par/face value: Periodic payment: Current price Call price: Years till callable: Periods till callable: 30 2 6.25% $3,000 Hints: Try using rate function of Excel and enter periods to maturity, periodic payment, negative current price, par value; this is the yield for each period you own the bond $3,000 $7,500 10 Use your periodic yield to maturity and the periods per year; this is your yield for each year Bond #2 is a 30 year, 6.25% semiannual coupon bond. It has a par/face value of $3,000 and may be called in 10 years at a call price of $7,500. The bond sells for $3,000. Complete the information in the table below. This is a dollar value, not a percent; the payment amount you can expect each year Ann. Coupon Rate / Current Price; yield based on current conditions Try using the RATE function of Excel Use your periodic yield to call x periods per year, this is your yield for each year until the bond is callable Formulas How long it is for Number of times it pays interest number of years x number of payment periods 25 years x 2 period Your interest rate Face value... aka the value of the bond Par value x (coupon rate / periods per year) Sale price Formulas using rate function, enter periods to maturity, periodic payment, negative current price, par value Amount paid should the bond be called early... aka the person using the bond money pays their loan off early When they can call it in, meaning pay you the $6000 for it number of years x number of periods Periodic yield to maturity x periods per year. Periodic payment x periods per year Ann. Coupon / Current Price Rate function using: periods to call, periodic payment, negative current price, call price Periodic yield to call x periods per year Based on the bond information above, calculate the following information for Bond #1: Periodic Yield to Maturity = Annual Yield to Maturity - Annual Coupon Rate = Current yield = Periodic Yield to Call = Annual Yield to Call = Hints: Try using rate function of Excel and enter periods to maturity, periodic payment, negative current price, par value; this is the yield for each period you own the bond Use your periodic yield to maturity and the periods per year; this is your yield for each year This is a dollar value, not a percent; the payment amount you can expect each year Ann. Coupon Rate / Current Price; yield based on current conditions Try using the RATE function of Excel Use your periodic yield to call x periods per year, this is your yield for each year until the bond is callable Formulas using rate function, enter periods to maturity, periodic payment, negative current price, par value Periodic yield to maturity x periods per year Periodic payment x periods per year Ann. Coupon / Current Price Rate function using: periods to call, periodic payment, negative current price, call price. Periodic yield to call x periods per year Analysis Question: In your opinion, which bond is the better purchase for investors? Why do you feel it is the better purchase? Explain your answer using a minimum of 3 sentences.

Answer rating: 100% (QA)

To calculate the various yields for Bond 1 we will use the given information and the provided formulas Bond 1 is a 10year 45 semiannual coupon bond wi... View the full answer