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Posted by: Homeworkhelp
Price Quoted by Student: $15
Posted On: 2016-04-04 08:08:15
 
Question
Chapter 13 1. A $1,000 bond has a coupon of 6 percent and matures after 10 years. a. What would be the bond's price if comparable debt yields 8 percent? c. Why are the prices different in a and b? d. What are the current yields and the yields to maturity in a and b? 2. a. A $1,000 bond has a 7.5 percent coupon and matures after 10 years. If current interest rates are 10 percent, what should be the price of the bond? b. If after six years interest rates are still 10 percent, what should be the price of the bond? c. The price of the bond changed because certain time period passed. d. Change the interest rate in a and b to 6 percent and rework your answers. Even though the interest rate is 6 percent in both calculations, why are the bond prices different? 3. Carrie's 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. a. What is the bond's coupon rate? b. What is the current yield? c. What is the yield to maturity? 9. A bond has the following features: • coupon rate interest: 8% • principal: $1,000 • term to maturity: 10 years a. what will the holder receive when the bond matures? b. If the current rate of interest on comparable debt is 12 percent, what should be the price of this bond? Would you expect the firm to call this bond? Why? c. If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for 10 years if the funds earn 9 percent annually and there is $10 million outstanding? TUTORIAL PREVIEWPrice = $1,000 x 0.4632 + $1,000 x 6% x 6.7101 = $463.20 + $402.61 = $865.81

Solutions
Chapter 13 1. A $1,000 bond has a coupon of 6 pe
Price $15
Attachment 1: Finance question - chapter 13.docx
Solution Posted By: Homeworkhelp    Posted on: 04-04-2016