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You are offered to buy a 4-year coupon corporate bond in the beginning of its 7th month on its third year for $963.94. Its face value is $1,000 and its coupon rate is 5.172% p.a. with coupon paid at the end of each quarter. Government bond rate now is 6.9%.
(A)
The company just paid a $1.48 annual dividend and announced the plans to pay $1.54 next year. The
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- You are offered to buy a 4-year coupon corporate bond in the beginning of its 7th monthon its third year for $963.94. Its face value is $1,000 and its coupon rate is 5.172% p.a.with coupon paid at the end of each quarter. Government bond rate now is 6.9%.(a) Is $963.94 a good price for you to buy it or not? What is the fair price for the bond?(b) What is the yield if you buy at the price that you have been offered?(c) If the government bond rate suddenly goes down to 4.7%, what will be the new fairvalue of the bond?B. The company just paid a $1.48 annual dividend and announced the plans to pay $1.54next year. The dividend growth rate is expected to remain constant at the current level forthe following 4 years and then settle at 3 percent per year. If you are planning to buy thisstock in two years’ time, how much would you expect to pay for it if the required rate ofreturn is 7 percent at the time of your purchase? (Use two decimal rounding)A. you are offered to buy a 4 year coupon bond in the beginning of its 7th month on its third year for $963.94. its face value is $1,000 and its coupon rate is 5.172% per annum, with coupon paid at the end of each quarter . government bond rate now is 6.9%. a. is $963.94 a good price for you to buy it or not ? what is the fair price for the bond ? b. what is the yield if you buy at the price that you have been offered ? c. if the government bond rate suddenly goes down to 4.7%, what will be the fair value of the bond ? B. the company just paid $1.48 annual dividend and announce the plns to pay $1.54 next year . the dividend growthrate is expected to remain constant at the current level for the following 4 years and then settle at 3% per year , if you are planning to buy this stock in 2 years time, how much would you expect to pay for it if the required rate of return is 7% at the time of your purchase ? ( use two deciaml rounding )A. you offered to buy a 4 year coupon corporate bond in the beginning of its 7th monthon its third year for $963.94. its face value is $1,000 and its coupon rate is 5.172% per annum, with coupon paid at the end of each quarter. Government bond rate now is 6.9%. a. is $963.94 a good price for you to buy it or not ? what is the fair price for the bond ? b. what is the yield if you buy at the price that you been offered ? c. if the government bond rate suddenly goes down to 4.7% what will be the new fair value of the bond ? B. the company just paid a $1.48 annual dividend and announced the plan to pay $1.54 next year . the dividend growth rate is expected to remain constant at the current level for the following 4 years and then settle at 3% per year . if you are planning to buy this stock in 2 years time , how much would you expect to pay for it if the required rate of return is 7% at the time you purchase ? ( use two decimal rounding )
- The stock of the Health Corporation is currently selling for Rs.20 a share and is expected to pay a Rs.1 dividend at the end of the year. If you bought the stock now and sold it for Rs.23 after receiving the dividend, what rate of return would you earn? Q 2 Gonzalez Electric Company has outstanding a 10 percent bond issue with a face value of Rs.1,000 per bond and three years to maturity. Interest is payable annually. The bonds are privately held by Suresafe Fire Insurance Company. Suresafe wishes to sell the bonds and is negotiating with another party. It estimates that, in current market conditions, the bonds should provide a (nominal annual) return of 14 percent. What price per bond should Suresafe be able to realize on the sale?A. You are offered to buy a 4-year coupon corporate bond in the beginning of its 7th month on its third year for $963.94. Its face value is $1,000 and its coupon rate is 5.172% p.a. with coupon paid at the end of each quarter. Government bond rate now is 6.9%. (a) Is $963.94 a good price for you to buy it or not? What is the fair price for the bond? (b) What is the yield if you buy at the price that you have been offered? (c) If the government bond rate suddenly goes down to 4.7%, what will be the new fair value of the bond? B. The company just paid a $1.48 annual dividend and announced the plans to pay $1.54 next year. The dividend growth rate is expected to remain constant at the current level for the following 4 years and then settle at 3 percent per year. If you are planning to buy this stock in two years' time, how much would you expect to pay for it if the required rate of return is 7 percent at the time of your purchase? (Use two decimal rounding)A firm has issued $100M in a 6% semi-annual bond which has 5 years remaining and is trading in the market today at a discount of 2% (i.e. priced at $98 per $100 par). The company tax rate is 30%. How does this look in the WACC calculation?
- Suppose Ford Motor Company issues a five year bond with a face value of $5,000 that pays an annual coupon payment of $150. a. What is the interest rate Ford is paying on the borrowed funds? b. Suppose the market interest rate rises from 3% to 4% a year after Ford issues the bonds. Will the value of the bond increase or decrease?ROFL Limited has asked you to calculate the debt component to help in its calculation of its weighted average cost of capital (WACC). ROFL has 2,000 Corporate Bonds outstanding with a face value of $49,000 each. The coupon rate is 4% pa. compounding semi-annually. The bonds mature in 12 years and currently ROFL bonds are trading in the market at a yield of 7%p a. If a coupon payment was paid today what is the total market value of ROFLS issued bonds? Provide your answer to the nearest dollar.Q3. A company issues a $ 20,000 bond at a coupon rate of 7.5% payable semi-annually. Joan purchased this bond 10 years before maturity when the yield was 7% compounded semi-annually and sold it two years later when the bond's market yield was 8% compounded semi-annually. Calculate the gain or loss on this investment.
- You bought a $1000 corporate bond for $900 three years ago. It is paying $30 in interest at the end of every 6 months, and it matures in 5 more years. (a) Compute its coupon rate. (b) Compute its current value, assuming the market interest rate for such investments is 4% per year, compounded semiannually.The company you work for is offering bonds that have a face value of $1,000 and a life of 10 years. Since $40 or 46 of the face value is paid every 6 months, the bond has a nominal or coupon rate of 8w per year. If your company paid and underwer 19 to sell the bond, which answer is closest to the effective annual interest rate that the company is paying on the bond? a. 7.160% b. 4,077% C. 4.500% d. 8.320% e. None of theseA company issued a bond a few years ago that has a face value equal to $1,000 and pays investors $30 interest every six months. The bond has eight years remaining until maturity. If you require a 7 percent rate of return to invest in this bond, what is the maximum price you should be willing to pay to purchase the bond? * $965.63 $1,062.81 $939.53 $940.29 O $761.15