Question Rest attched in the file total 34 question

29 Jun Question Rest attched in the file total 34 question

Question
Rest attched in the file total 34 question

1 Problem 10-2 Bond value [LO3]

Applied Software has $1,000 par value bonds outstanding at 20 percent interest. The bonds will mature in 15 years. Use.mhhe.com/connect/0073530727/Images/Appendix_B.jpg”>Appendix Band.mhhe.com/connect/0073530727/Images/Appendix_D.JPG”>Appendix D.

Compute the current price of the bonds if the present yield to maturity is(Round “PV Factor” to 3 decimal places, intermediate and final answers to2 decimal places. Omit the “$” sign in your response):

Price of the
bond

(a) 10 percent

$

(b) 15 percent

$

(c) 12 percent

$

2.

value:
1.00 points

Problem 10-4 Bond value [LO3]

Barry’s Steroids Company has $1,000 par value bonds outstanding at 14 percent interest. The bonds will mature in 40 years.

If the percent yield to maturity is 11 percent, what percent of the total bond value does the repayment of principal represent? Use.mhhe.com/connect/0073530727/Images/Appendix_B.jpg”>Appendix Band.mhhe.com/connect/0073530727/Images/Appendix_D.JPG”>Appendix D.(Round intermediate calculations to 2 decimal places, “PV Factor” and final answer to 3 decimal places. Omit the “%” sign in your response.)

Principal repayment

%

3.

value:
1.00 points

Problem 10-5 Bond value [LO3]

Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 19 percent annual interest. The current yield to maturity on such bonds in the market is 11 percent. Use.mhhe.com/connect/0073530727/Images/Appendix_B.jpg”>Appendix Band.mhhe.com/connect/0073530727/Images/Appendix_D.JPG”>Appendix D.

Compute the price of the bonds for these maturity dates(Round “PV Factor” to 3 decimal places, intermediate and final answers to 2 decimal places. Omit the “$” sign in your response):

Price of the
bond

(a) 25 years

$

(b) 15 years

$

(c) 4 years

$

rev: 04_27_2012

check my workeBook Linkr

5.

value:
1.00 points

Problem 10-11 Effect of maturity on bond price [LO3]

Refer to.mhhe.com/connect/0073530727/Images/Table%2010-2.JPG”>Table 10-2

(a)

Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. Using column 2, indicate what the bond price will be with a 10-year, a 20-year, and a 30-year time period.(Round “PV Factor” to 3 decimal places, intermediate calculations and final answers to 2 decimal places. Omit the “$” sign in your response.)

Maturity

Bond price

10 Years

$

20 years

30 years

(b)

Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. Using column 3, indicate what the bond price will be with a 10-year, a 20-year, and a 30-year period.(Round “PV Factor” to 3 decimal places, intermediate calculations and final answers to 2 decimal places. Omit the “$” sign in your response.)

Maturity

Bond price

10 Years

$

20 years

30 years

(c)

Assume the interest rate in the market (yield to maturity) goes down to 8 percent for the 10 percent bonds. If interest rates in the market are going down, which bond would you choose to own?

Longest-term bond

Shortest-term bond

(d)

Assume the interest rate in the market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If interest rates in the market are going up, which bond would you choose to own?

Longest-term bond

Shortest-term bond

6.

value:
1.00 points

Problem 10-13 Effect of yield to maturity on bond price [LO3]

Tom Cruise Lines, Inc., issued bonds five years ago at $1,000 per bond. These bonds had a 20-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below:

Real rate of return

4

%

Inflation premium

5

Risk premium

5

Total return

14

%

Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 years remaining until maturity.

Compute the new price of the bond. Use.mhhe.com/connect/0073530727/Images/Appendix_B.jpg”>Appendix Band.mhhe.com/connect/0073530727/Images/Appendix_D.JPG”>Appendix D.(Round “PV Factor” to 3 decimal places, intermediate and final answer to 2 decimal places. Omit the “$” sign in your response.)

New price

$

rev: 07-13-2011

7.

value:
2.00 points

Problem 10-14 Analyzing bond price changes [LO3]

(a)

Find the present value of 3 percent × $1,000 (or $30) for 15 years at 11 percent. The $30 is assumed to be an annual payment. Use.mhhe.com/connect/0073530727/Images/Appendix_D.JPG”>Appendix D. (Round “PV Factor” to 3 decimal places, intermediate and final answerto 2 decimal places. Omit the “$” sign in your response.)

Present value

$

(b)

Add the answer obtained in partato 1,000.(Round “PV Factor” to 3 decimal places, intermediate and final answerto 2 decimal places. Omit the “$” sign in your response.)

Present value

$

8.