Tracer Manufacturers issued a 10-year bond six years ago. The bond’s maturity value is $1,000, and its coupon interest rate is 6 percent. Interest is paid semiannually. The bond matures in four years. If investors require a return equal to 5 percent to invest in similar bonds, what is the current market value of Tracer’s bond?

Tracer Manufacturers issued a 10-year bond six years ago. The bond’s maturity value is $1,000, and its coupon interest rate is 6 percent. Interest is paid semiannually. The bond matures in four years. If investors require a return equal to 5 percent to invest in similar bonds, what is the current market value of Tracer’s bond?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

See similar textbooks

Similar questions

BA Corp is issuing a 10-year bond with a coupon rate of 8 percent. The interest rate for similar bonds is currently 6 percent. Assuming annual payments, what is the value of the bond? Knight, Inc., has issued a three-year bond that pays a coupon rate of 6.10 percent. Coupon payments are made semiannually. Given the market rate of interest of 5.80 percent, what is the market value of the bond? Diane Carter is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond? Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 5.875 percent. If these bonds have a market price of $981.13, what yield to maturity can she expect to earn? Rudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds have a coupon rate of 6 percent and make…
A corporate bond has 23 years to maturity, a face value of $1,000, a coupon rate of 5.5% and pays interest semiannually. The annual market interest rate for similar bonds is 3.4%. What is the value of the bond?
Buner Corp’s outstanding bonds, which has a face value of $1,000, have 6 years remaining to maturity. The bond’s coupon rate of interest is 8%, and interest is paid semiannually. If investors require a rate of return equal to 6% to invest in similar risk bonds, what should be the market price of Buner’s bond?
Lightning Electric’s outstanding bond has a $1000 maturity value and a 4.5 percent coupon rate of interest (paid semiannually). The bond, which was issued five years ago, mature in 10 years. If investors require a return equal to 6 percent to invest in similar bonds, what is the current market value of Lightning’s bond?
Carries Clothes, Inc. has a five -year bond outstanding that pays $60 annually. The face value of each bond is $1,000, and the bond sells for $890. Use semi- annual interest payments if it applies. What is the bond’s coupon rate? What is the current yield? What is the yield to maturity?
Blossom Corp is issuing a 10-year bond with a coupon rate of 13 percent. The interest rate for similar bonds is currently 7 percent. Assuming annual payments, what is the value of the bond? Assume face value is $1000. Value of bond? $
An issue of bonds with par of $1000 matures in 12 years and pays interest at 7% annually. The current quoted market price is $1200 and the investors required rate of return is 8%. (a) Calculate the bonds expected rate of return. (b) Should the investor purchase the bond? (Explain your answer.)
Verbrugge Company has a level-coupon bond outstanding that pays coupon interest of $120 per year and has 10 years to maturity. The face value of the bond is $1,000. If the yield for similar bonds is currently 14%, what is the bond’s current market value? For the Verbrugge Company bond described in Problem 1, find the bond’s value if the yield for similar bonds decreases to 12%. For the Verbrugge Company bond described in Problem 1, find the bond’s value if the yield for similar bonds decreases to 9%. Suppose the Verbrugge bond paid interest semiannually. What is its value if the yield is 14%? A firm issues an annual bond today with a $1,000 face value, an 8% annual coupon interest rate, and 25-year maturity. An investor purchases the bond for $1,000. What is the yield to maturity (YTM)? Suppose the investor bought the bond described in the previous problem for $900. What’s the YTM?