On January 1, 2010, Water Wonderland issues $20 million of 8% bonds, due in ten years, with interest payable semi-annually on June 30 and December 31 each year. 1. If the market rate is 7%, will the bonds issue at face amount, a discount, or a premium

Answers

Answer 1

Answer:

the bonds will trade at a Premium

Explanation:

When the Yield to Maturity (YTM) is less than the Coupon Rate, the price of the Bond will be greater than the par value and we say that the Bond is trading at a Premium.

The Yield to Maturity of 7% is less than the Coupon rate 8% hence the bond will trade at a Premium.

Calculation of the Price of Bond

Alternatively we can calculate the price of the Bond a see for ourselves as follows :

FV = $20,000,000

PMT = ($20,000,000 × 8%) ÷ 2 = $8,00,000

P/YR = 2

YTM = 7 %

N = 10 × 2 = 20

PV = ?

Using a Financial calculator to input the values as above we can calculate the Price of Bond (PV) as $21,421,240.


Related Questions

Other Questions
CAN YOU PLEASE NOT ANSWER FOR THE POINTS Identify the purpose of each topic as either to inform or to persuade.a nutritional label on a juice cartonthe need for daylight savings timeten reasons to exercisebaseball resultswhy teaching music is importanta city event calendar if there are 7282 male students at georgia institute of technology, how much females are there? Find the missing side. Round to the nearest tenth.X1620 Evaluate the expression below when x = 5.5 and y = 6. 4(x+6)3(y+4) Reread the following paragraph.In the midst of the Australian desert, a giant rock rises from the red sand, creating an iconic silhouette. Colonists once called the sandstone monolith Ayers Rock, but today it is known by its Aboriginal name: Uluru. Officially owned by one of Australias aboriginal groups, Uluru is part of an Australian national park and a designated United Nations Heritage Site.Which inference is supported by the most textual evidence in the paragraph?A.Uluru has a storied history.B.Uluru is of great cultural importance.C.Uluru is a popular tourist destination.D.Uluru means more to Australias Aborigines than others. In both passages, the authors reference Daphne becoming a tree. How does the author of Passage 2 transform the source material of Passage 1?In Passage 1, she is excited about becoming a tree, but in Passage 2, she is fearful about it.o In Passage 1, she changes into a tree against her will, but in Passage 2, she accepts her fate.o In Passage 1, she turns into a tree to trick Apollo, but in Passage 2, she does it to impress him.o In Passage 1, she relies on her father to turn her into a tree, but in Passage 2, she has control over it. which model best shows the movement of oxygen during photosynthesis What if we are like in a movie or something and there are people from a different world watching our life?What is your life like? this aint homework Im just bored Sugar and flour are mixed in the ratio 3.5 in a sweet recipe in another recipe 15 parts of flour are used if these two ingredeints on both recipes are in both recipes are an equivalent ratio Solve 2x^2+8x-1=0 can someone type this "correctly" in photo math for me please? How is your day? I hope you had a great one! Did the Barnum and Bailey Circus open before or after the completion of the Brooklyn Bridge? Read the poem.Song of the Open Roadby Walt WhitmanAfoot and light-hearted, I take to the open road,Healthy, free, the world before me,The long brown path before me, leading wherever I choose.Henceforth I ask not good-fortuneI myself am good-fortune;Henceforth I whimper no more, postpone no more, need nothing,Strong and content, I travel the open road. . . .From this hour, freedom!From this hour I ordain myself loosd of limits and imaginary lines,Going where I list, my own master, total and absolute,Listening to others, and considering well what they say,Pausing, searching, receiving, contemplating,Gently, but with undeniable will, divesting myself of the holds that would hold me.I inhale great draughts of space;The east and the west are mine, and the north and the south are mine.I am larger, better than I thought;I did not know I held so much goodness.All seems beautiful to me;I can repeat over to men and women, You have done such good to me, I would do the same to you.I will recruit for myself and you as I go;I will scatter myself among men and women as I go;I will toss the new gladness and roughness among them;Whoever denies me, it shall not trouble me;Whoever accepts me, he or she shall be blessed, and shall bless me.Read this line from "Song of the Open Road." Healthy, free, the world before me,What does the phrase "the world before me" mean in the poem?The speaker feels ready to explore the world.The speaker wants to show others the world.The speaker has never seen the world's beauty.The speaker feels the burden of carrying the world. At an arcade, Michael pays $0.50 for each game he plays. proportional or non-proportional? Question 25 pts(03.01 MC)The nucleus of an atom is dense and positively charged. What was observed whenpositively charged particles were radiated onto a gold atom during Rutherford'sexperiment because of this?O Negative charges were concentrated at the center of the atom.NParticles that struck the center of the atom were repelled.Particles that struck the edges of the atom were repelled.Positive charges were distributed all over the atom. Write the slope-intercept form of the equation of the line passing through the point (5, - 1) and parallel to the line y = 4x - 1 Which expression uses the greatest common factor and the distributive property to write the sum 36 1 54 as a product? A 6(6 1 9) B 9(4 1 6) C 18(2 1 3) D 27(9 1 27) please answer I will mark as brainliest please answer up questions I will mark as brainliest Could somebody help w/ this? :>