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bus 320 connect homework 5

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Question.;value:1.00;points;Problem 10-2 Bond;value [LO3];Applied Software has $1,000 par;value bonds outstanding at 16 percent interest. The bonds will mature in 20;years. UseAppendix;BandAppendix;D.;Compute the current price of the;bonds if the present yield to maturity is(Round "PV Factor" to 3 decimal places, intermediate and;final answers to2;decimal places. Omit the "$" sign in your response);Price;of the;bond;(a) 8 percent;$;(b) 14 percent;$;(c) 11 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 12 percent, what percent of the total bond value does the repayment of;principal represent? UseAppendix;BandAppendix;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 $1,000;par value bond outstanding that pays 14 percent annual interest. The current;yield to maturity on such bonds in the market is 9 percent. UseAppendix;BandAppendix;D.;Compute the price of the bonds for;these maturity dates(Round "PV;Factor" to 3 decimal places, intermediate and final answers to 2 decimal;places. Omit the "$" sign in your response);Price;of the;bond;(a) 40 years;$;(b) 17 years;$;(c) 5 years;$;4.;value:2.00;points;Problem 10-8 Interest;rate effect [LO3];Refer toTable;10-1, which is based on bonds paying 10 percent interest for 20;years. Assume interest rates in the market (yield to maturity) go from 10;percent to 9 percent.;(a);What was the bond price at 10;percent?(Round "PV Factor" to 3 decimal;places, intermediate calculations and final answers to 2 decimal places. Omit;the "$" sign in your response.);Bond price;$;(b);What is the bond price at 9;percent?(Round "PV Factor" to 3 decimal;places, intermediate calculations and final answers to 2 decimal places. Omit;the "$" sign in your response.);Bond price;$;(c);What would be your percentage;return on the investment if you bought when rates were 10 percent and sold;when rates were 9 percent?(Round "PV Factor" to 3 decimal;places, intermediate calculations and final answers to 2 decimal places.;Enter the value as positive value. Omit the "%" sign in your;response.);(Click to select);Profit;Loss;on investment;%;5.;value:1.00;points;Problem 10-11 Effect;of maturity on bond price [LO3];Refer toTable;10-2;(a);Assume the interest rate in the;market (yield to maturity) goes down to 8 percent for the 10 percent bonds.;Using column 2, indicate what the bond price will be with a 5-year, a;25-year, and a 30-year time period.(Round;PV Factor" to 3 decimal places, intermediate calculations and;final answers to 2 decimal places. Omit the "$" sign in your;response.);Maturity;Bond;price;5 Years;$;25 years;30 years;(b);Assume the interest rate in the;market (yield to maturity) goes up to 12 percent for the 10 percent;bonds. Using column 3, indicate what the bond price will be with a 5-year, a;25-year, and a 30-year period.(Round;PV Factor" to 3 decimal places, intermediate calculations and;final answers to 2 decimal places. Omit the "$" sign in your;response.);Maturity;Bond;price;5 Years;$;25 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?;Shortest-term bond;Longest-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 $1,000 per bond. These bonds had a 30-year life when;issued and the annual interest payment was then 15 percent. This return was;in line with the required returns by bondholders at that point as described;below;Real rate of return;5;%;Inflation premium;6;Risk premium;4;Total;return;15;%;Assume that five years later the;inflation premium is only 2 percent and is appropriately reflected in the;required return (or yield to maturity) of the bonds. The bonds have 25 years;remaining until maturity.;Compute the new price of the bond.;UseAppendix;BandAppendix;D.(Round;PV Factor" to 3 decimal places, intermediate and final answer;to 2 decimal places. Omit the "$" sign in your response.);New price;$;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 25 years at 12 percent. The $30 is assumed to;be an annual payment. UseAppendix;D. (Round "PV Factor" to;3 decimal places, intermediate and final answerto 2 decimal places. Omit the "$" 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.;value:2.00;points;Problem 10-17 Deep;discount bonds [LO3];Lance Whittingham IV specializes;in buying deep discount bonds. These represent bonds that are trading at well;below par value. He has his eye on a bond issued by the Leisure Time;Corporation. The $1,000 par value bond pays 7 percent annual interest and has;16 years remaining to maturity. The current yield to maturity on similar;bonds is 12 percent.;(a);What is the current price of the;bonds? UseAppendix;BandAppendix;D. (Round "PV Factor" to;3 decimal places, intermediate and final answers to 2 decimal places. Omit;the "$" sign in your response.);Current price;$;(b);By what percent will the price of;the bonds increase between now and maturity?(Round;PV Factor" to 3 decimal places, intermediate and final answers to;2 decimal places. Omit the "%" sign in your response.);Price increases by;%;9.;value:1.00;points;Problem 10-19;Approximate yield to maturity [LO3];Bonds issued by the Tyler Food;Corporation have a par value of $1,000, are selling for $1,570, and have 20;years remaining to maturity. The annual interest payment is 14.5 percent;($145).;Compute the approximate yield to;maturity.(Do not round intermediate calculations. Round;your answer to 2 decimal places. Omit the "%" sign in your;response.);Approximate yield to;maturity;%;10.;value:2.00;points;Problem 10-22 Bond;value-semiannual analysis [LO3];You are called in as a financial;analyst to appraise the bonds of Olsen?s Clothing Stores. The $1,000 par;value bonds have a quoted annual interest rate of 8 percent, which is paid;semiannually. The yield to maturity on the bonds is 10 percent annual interest.;There are 15 years to maturity. UseAppendix;BandAppendix;D.;(a);Compute the price of the bonds;based on semiannual interest payments.(Round;PV Factor" to 3 decimal places, intermediate and final answer to 2;decimal places. Omit the "$" sign in your response.);Price of the bonds;$;(b);With 10 years to maturity, if;yield to maturity goes down substantially to 8 percent, what will be the new;price of the bonds?(Round "PV Factor" to 3 decimal;places, intermediate and final answer to 2 decimal places. Omit the;$" sign in your response.);New price;$;1;Rest are in the doc

 

Paper#45578 | Written in 18-Jul-2015

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