Fast and Loose Company has ourstanding an 8 percent, four-year, $1,000-par-value bond on which interest is...

  

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Fast and Loose Company has ourstanding an 8 percent, four-year, $1,000-par-value bond on which interest is paid annually. n a. If the market required rate of return is 15 percent, what is the market value of the bond? b. What would be its market value if the market required return dropped to 12 percent To 8 percent? c. If the coupon rate were 15 percent instead of 8 percent, what would be the market value [under Part (a)]? If the required rate of return dropped to 8 percent, what would happen to the market price of the bond? Table II PVIFi,n 1% 1 0.99 2 0.98 3 0.97 4 5 2% 0.98 0.961 3% 4% 5% 0.97 0.961 0.952 0.943 0.942 0.924 0.907 0.889 0.942 0.915 0.888 0.863 0.839 4 0.96 0.923 0.888 0.854 0.822 0.792 5 0.951 0.905 0.862 0.821 0.784 p. 747 Table IV PVIFAi,n 期数| 1% 2% 3% 1 0.9901 0.9804 0.9709 2 1.9704 1.9416 1.9135 3 2.9410 2.8839 2.8286 2.7751 3.9020 3.8077 3.7171 3. 6299 4.8534 4.7135 4.5797 4.4518 6% 10% 12% 14% 15% 16% 18% 0.925 0.909 0.892 0.8770. 869 0.862 0.857 0.826 0.797 0. 7690. 756 0.743 0.847 0.718 b. 608 0.793 0.751 0.711 0.6740.657 0.64 0.735 0.683 0.635 0. 5920. 571 0.552 0.476 0.68 0.62 0.567 0.5190.497 0.567 0.5190. 497 8% 4% 5% 0.9615 0.9524 6% 7% 0.9434 0.9346 1.8861 1.8594 1.8334 1.8080 2.7232 2.6730 2.6243 3.5460 3. 4651 4.3295 4.2124 3.3872 4.1002 0.515 0.437 8% 0.9259 1.7833 9% 10% 11% 12% 13% 14% 15% 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 3.3121 3.2397 3.1699 3. 1024 3.0373 2.9745 2.9137 2.8550 3.8897 3.7908 3.6959 3.6048 3.5172 3. 4331 3.3522 3.9927 Fast and Loose Company has ourstanding an 8 percent, four-year, $1,000-par-value bond on which interest is paid annually. n a. If the market required rate of return is 15 percent, what is the market value of the bond? b. What would be its market value if the market required return dropped to 12 percent To 8 percent? c. If the coupon rate were 15 percent instead of 8 percent, what would be the market value [under Part (a)]? If the required rate of return dropped to 8 percent, what would happen to the market price of the bond? Table II PVIFi,n 1% 1 0.99 2 0.98 3 0.97 4 5 2% 0.98 0.961 3% 4% 5% 0.97 0.961 0.952 0.943 0.942 0.924 0.907 0.889 0.942 0.915 0.888 0.863 0.839 4 0.96 0.923 0.888 0.854 0.822 0.792 5 0.951 0.905 0.862 0.821 0.784 p. 747 Table IV PVIFAi,n 期数| 1% 2% 3% 1 0.9901 0.9804 0.9709 2 1.9704 1.9416 1.9135 3 2.9410 2.8839 2.8286 2.7751 3.9020 3.8077 3.7171 3. 6299 4.8534 4.7135 4.5797 4.4518 6% 10% 12% 14% 15% 16% 18% 0.925 0.909 0.892 0.8770. 869 0.862 0.857 0.826 0.797 0. 7690. 756 0.743 0.847 0.718 b. 608 0.793 0.751 0.711 0.6740.657 0.64 0.735 0.683 0.635 0. 5920. 571 0.552 0.476 0.68 0.62 0.567 0.5190.497 0.567 0.5190. 497 8% 4% 5% 0.9615 0.9524 6% 7% 0.9434 0.9346 1.8861 1.8594 1.8334 1.8080 2.7232 2.6730 2.6243 3.5460 3. 4651 4.3295 4.2124 3.3872 4.1002 0.515 0.437 8% 0.9259 1.7833 9% 10% 11% 12% 13% 14% 15% 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 3.3121 3.2397 3.1699 3. 1024 3.0373 2.9745 2.9137 2.8550 3.8897 3.7908 3.6959 3.6048 3.5172 3. 4331 3.3522 3.9927

Answer rating: 100% (QA)

a End of Year Payment Discounting Factor 8 Present Value 1 8000 0925925926 7407 ... View the full answer