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BBA 3310 Unit VI Assignment

BBA 3310 Unit VI Assignment PLDZ-1535
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Question 1: (10 points). (Bond valuation) Calculate the value of a bond that matures in 12 years and has $1,000 par value. The annual coupon interest rate is 9 percent and the market's required yield to maturity on a comparable-risk bond is 12 percent. Round to the nearest cent.

 

 

The value of the bond is

 

 

Question 2: (10 points). (Bond valuation) Enterprise, Inc. bonds have an annual coupon rate of 11 percent. The interest is paid semiannually and the bonds mature in 9 years. Their par value is $1,000. If the market's required yield to maturity on a comparable-risk bond is 14 percent, what is the value of the bond? What is its value if the interest is paid annually and semiannually? (Round to the nearest cent.)

 

 

$

 

$

 

Question 3: (10 points). (Yield to maturity) The market price is $750 for a 20-year bond ($1,000 par value) that pays 9 percent annual interest, but makes interest payments on a semiannual basis (4.5 percent semiannually). What is the bond's yield to maturity? (Round to two decimal places.)

 

The bond's yield to maturity is

 

%

 

Question 4: (10 points). (Yield to maturity) A bond's market price is $950. It has a $1,000 par value, will mature in 14 years, and has a coupon interest rate of 8 percent annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in 28 years? What if it matures in 7 years? (Round to two decimal places.)

 

The bond's yield to maturity if it matures in 14 years is

 

%

The bond's yield to maturity if it matures in 28 years is

 

%

The bond's yield to maturity if it matures in 7 years is

 

%

 

Question 5: (15 points). (Bond valuation relationships) Arizona Public Utilities issued a bond that pays $70 in interest, with a $1,000 par value and matures in 25 years. The markers required yield to maturity on a comparable-risk bond is 8 percent. (Round to the nearest cent.) For questions with two answer options (e.g. increase/decrease) choose the best answer and write it in the answer block.

 

 

Question

Answer

 

$

 

 

 

$

 

 

 

$

 

 

 

 

By contrast in interest rates will cause the value to (increase/decrease):

 

Also, based on the answers in part b, if the yield to maturity (current interest rate) equals the coupon interest rate, the bond will sell at (par/face value):

 

exceeds the bond's coupon rate, the bond will sell at a (discount/premium):

 

and is less than the bond's coupon rate, the bond will sell at a (discount/premium):

 

 

 

 

$

 

 

 

$

 

 

 

 

 

 

 Question 6: (5 points). (Measuring growth) If Pepperdine, Inc.'s return on equity is 14 percent and the management plans to retain 55 percent of earnings for investment purposes, what will be the firm's growth rate? (Round to two decimal places.)

 

 

The firm's growth rate will be

 

%

 

 

document using your last name and student ID as the file name. Upload the data sheet to Blackboard as a .doc, .docx or .rtf file when you are finished. Question 1: (10 points). (Bond valuation) Calculate the value of a bond that matures in 12 yea
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