Two years ago your corporate treasurer purchased for the, Ask an Expert

Finance

Two years ago your corporate treasurer purchased for the firm a 20-year bond at its par value of $1,000. The coupon rate on this security is 8%. Interest payments are made to bondholders once a year. Currently, bonds of this particular risk class are yielding investors 9%. A cash shortage has forced you to instruct you to instruct your treasurer to liquidate the bond.

a. At what price will your bond be sold? Assume annual compounding.
b. What will be the amount of your gain or loss over the original purchase price?
c. What would be the amount of your gain or loss had the treasurer originally purchased a bond with a 4-year rather than a 20- year maturity?
d. What do we call this type of risk assumed by your corporate treasurer?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9880317

Have any Question?Write your Review or question?

Related Questions in Basic Finance

What are some best practices that can be offered with

What are some best practices that can be offered with respect to scheduling and network diagramming

Question -discuss the incremental impact of a hypothetical

Question - Discuss the incremental impact of a hypothetical, but reasonable, simple new investment project, such as a new product or facility or a cost-cutting investment, as an initial step in thinking about the future. ...

A company has 6 percent coupon compounded semiannually

A company has 6 percent coupon (compounded semiannually) bonds on the market with 15 years to maturity, and the par value of $1,000. At what price should the bonds be selling for if YTM is 7%? Had the bond been selling a ...

Questions -1 choose two stocks in two different sectors

Questions - 1. Choose two stocks (in two different sectors) from Yahoo Finance (*these two companies should have been on the market for more than 3 years, and should also pay dividends historically). Download Monthly His ...

1 what special problem do off-balance-sheet activities

1. What special problem do off-balance-sheet activities present to bank regulations? (200words) 2. With respect to off-balance-sheet activities, what have bank regulator done about it? (200words)

You take out a 25-year 210000 mortgage loan with an apr of

You take out a 25-year $210,000 mortgage loan with an APR of 12% and monthly payments. In 16 years you decide to sell your house and pay off the mortgage. What is the principal balance on the loan?

What is the present value of a 3-year annuity of 170 if the

What is the present value of a 3-year annuity of $170 if the discount rate is 5%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Corporate finance assignment -question 1 a assume that you

Corporate Finance Assignment - Question 1: a) Assume that you will deposit $4000 at the end of each of the next three years in a St. George bank account paying 8% interest. You currently have $7000 in the account. How mu ...

If sheel inc has 7 percent coupon compounded semiannually

If Sheel Inc. has 7 percent coupon (compounded semiannually) bonds on the market with 10 years to maturity, and the par value of $1,000. AT what price should the bonds be selling for if the YTM is 5%? If the bond had bee ...

A bond that makes payments in a certain currency contains

A bond that makes payments in a certain currency contains the risk of holding that currency and so is priced according to the yields of similar bonds in that currency. True or false?

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert