Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon Government of Canada bond with two years to maturity (YTM) has a coupon rate of 6%. The yield to maturity of the bond is 9.90%. Using this information and ignoring the other costs involved, calculate the value of the bond: $1,116,928.30 $586,387.36 $791,157.54 $930,773.58 Based on your calculations and understanding of semiannual coupon bonds, complete the following statements: Assuming that interest rates remain constant, the bond's price is expected to The bond described is selling at a When valuing a semiannual coupon bond, the time period N in the present value formula used to periods calculate the price of the bond is treated in terms of Rating agencies-such as Standard & Poor's (S&P), Moody's Investor Service, and the Dominion Bond Rating Service (DBRS)-assign credit ratings to bonds based on both quantitative and qualitative factors. These ratings are considered indicators of the issuer's default risk, which impacts the bond's interest rate and the issuer's cost of debt capital. Based on these ratings, bonds are classified into investment-grade bonds and junk bonds. Which of the following bonds is likely to be classified as an investment-grade bond? A bond with 30% return on assets, total debt to total capital of 15%, and 6% yield A bond with 10% return on assets, total debt to total capital of 85%, and 13% yield You heard that rating agencies have upgraded a bond's rating. The yield on the bond is likely to and the bond's price will Assume you make the following investments: A $10,000 investment in a 10-year government bond that has a yield of 12.5% A $20,000 investment in a 10-year corporate bond with an A rating and a yield of 16.3% Based on this information, what is your estimate of the corporate bond's default risk premium? 3.8% 4.2% 5.7% 5.3%