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Please help I have been working on multiple problems and cannot complete do to time and work. Problem 8.27 Bond Yields Showbiz, Inc., has issued
Please help I have been working on multiple problems and cannot complete do to time and work.
Problem 8.27 Bond Yields Showbiz, Inc., has issued eight-year bonds with a coupon of 6.375 percent and semiannual coupon payments. The market's required rate of return on such bonds is 7.65 percent. a. What is the market price of these bonds? Hint: Find the market price of the bonds first using a formula and then by using the PV function: PV(rate,nper,pmt,fv,type). Use January 1, 2009, as the settlement date. Solution using formula Solution using PV function Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Market Price of the Bonds: Market Price of the Bonds: b.If the above bond is callable after five years at a 8.5% premium on the face value, what is the expected return on this bond? Hint: Use the RATE function to solve for the yield to maturity: RATE(nper, pmt, pv, fv, type, guess). Solution using function Settlement Date: Sale Date: Years to Sale: Par Value: Purchase Price: Selling Price: Coupon Rate: Semiannual Coupon Payment: Periodic Realized Return on the Bond: Effective Annual Yield on the Bond: Problem 8.28 Bond Yields Peabody Corp. has seven-year bonds outstanding. The bonds pay a coupon of 8.375 percent semiannually and are currently worth $1,063.49. The bonds can called in three years at a price of $1,075. a. What is the yield to maturity of these bonds? Hint: Use the RATE function to solve for the yield to maturity: RATE(nper, pmt, pv, fv, type, guess). Solution using function Years to Maturity: Years Owned: Par Value: Current Price: Coupon Rate: Semiannual Coupon Payment: Periodic Realized Return on the Bond: Yield to Maturity on the Bond: b. What is the effective annual yield? Effective Annual Yield on the Bond: c. What is the realized yield on the bond if they are called? Years to Maturity: Years Owned: Par Value: Current Price: Coupon Rate: Semiannual Coupon Payment: Periodic Realized Return on the Bond: Effective Realized Return on the Bond: d. If you plan to invest in one of these bonds today, what is the expected yield on the investment? Explain. Years to Maturity: Years Owned: Par Value: Current Price: Coupon Rate: Semiannual Coupon Payment: Periodic Return on the Bond: Effective Yield to Maturity on the Bond: Problem 8.29 Bond Prices and Interest Rates The Maryland Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a rate of 9.875 percent. The current market rate for similar securities is 11 percent. a. What is the current market value of one of these bonds? Hint: Find the market price of the bonds first using a formula and then by using the PV function: PV(rate,nper,pmt,fv,type). Use January 1, 2009, as the settlement date. Solution using formula Solution using PV function Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Market Price of the Bonds: Market Price of the Bonds: b. What will be the bond's price if rates in the market (i) decrease to 9 percent or (ii) increase to 12 percent? Solution using formula Solution using PV function Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Market Price of the Bonds (9%): Market Price of the Bonds (9%): Solution using formula Solution using PV function Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Market Price of the Bonds (12%): Market Price of the Bonds (12%): c. Refer to your answers in part b. How do the interest rate changes affect premium bonds and discount bonds? d. Suppose the bond were to mature in 12 years. How do the interest rate changes in part b affect the bond prices? Solution using formula Solution using PV function Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Market Price of the Bonds (9%): Market Price of the Bonds (9%): Solution using formula Solution using PV function Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Market Price of the Bonds (12%): Market Price of the Bonds (12%): Problem 8.30 Bond Yields Rachette Corp. has 18-year bonds outstanding. These bonds, which pay interest semiannually, have a coupon rate of 9.735 percent and a yield to maturity of 7.95 percent. a. Compute the current price of these bonds. Hint: Find the market price of the bonds first using a formula and then by using the PV function: PV(rate,nper,pmt,fv,type). Use January 1, 2009, as the settlement date. Solution using formula Solution using PV function Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Settlement Date: Maturity Date: Years to Maturity: Par Value: Coupon Rate: Semiannual Coupon Payment: Required Rate of Return: Market Price of the Bonds: Market Price of the Bonds: b. If the bonds can be called in five years at a premium of 13.5 percent over par value, what is the investor's realized yield? Hint: Use the RATE function to solve for the yield: RATE(nper, pmt, pv, fv, type, guess). Solution using RATE function Years to Maturity: Years Owned: Par Value: Current Price: Coupon Rate: Semiannual Coupon Payment: Periodic Realized Return on the Bond: Effective Realized Return on the Bond: c. If you bought one of these bonds today, what is your expected rate of return? Explain. Solution using RATE function Original Years to Maturity: Years Owned: Par Value: Current Price: Coupon Rate: Semiannual Coupon Payment: Periodic Realized Return on the Bond: Effective Realized Return on the BondStep by Step Solution
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