Problem 6.18 – Bond X & Y
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
10th Edition
Given the information on Bond X & Y… calculate the prices for each length of time.
Calculator Preview
Your numbers will vary.
Given the information on Bond X & Y… calculate the prices for each length of time.
Your numbers will vary.
What are the prices and expected prices of two bonds, Bond X and Bond Y, given their coupon rates, YTM, maturity, and par value, and what is the explanation for the differences in their prices over time? Determine the price of bonds X and Y today, one year from now, three years from now… etc. Fill out the grid.
Your numbers will vary.
What is the present value of an investment that pays $100,000 after 9 years, assuming a daily compounding discount rate of 5.5%? (Your numbers will vary). Find the present value.
Your numbers will vary.
Given the inflation rates, real risk-free rate, maturity risk premiums, premium increase, and the limit: a.) Calculate the interest rate on 1-year, 2-year, 3-year, 4-year, 5-year, 10-year, and 20-year Treasury securities b.) Estimate and plot what you believe a AAA-rated company’s yield curve. c.) On the same graph, plot the approximate yield curve of a much riskier lower-rated company.
Your numbers will vary.
What is the impact of an increase or decrease in interest rates on the price of short-term and long-term bonds? If interest rates rise or fall, what is the percentage change in the price of each bond?
Your numbers will vary.
Given what inflation was, the prime rate, and four different inflation rates… determine the average expected inflation, the average nominal interest rate, estimate the yield curve, and interpret the outcome.
Your numbers will vary.
Calculate the percentage change in the price for both bonds given a change in interest rates.
Your numbers will vary.
What is the APR and EAR for Big Dom’s Pawn Shop if it charges an interest rate per month on its loans to customers?
Your numbers will vary.
What is the impact on the price of Bond J and Bond K if interest rates suddenly change by 2 percent? Find the percentage price change for both bonds.
Your numbers will vary.
What are the monthly payments and the effective annual rate for a 48-month loan to buy a sports coupe priced at $90,500, given an APR of 7.2%? (Your numbers will vary). Find your monthly payments and the effective annual rate on the loan.
Your numbers will vary.