Assume a firm issues a bond with a face value of $1,000. The stated rate of interest is 20%. The market rate of interest is 14%. The maturity is in 3 years. Interest is paid annually. How much cash does the firm receive at the time of bond issuance?
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Assume a firm issues a bond with a face value of $1,000. The stated rate of interest is 20%. The market rate of interest is 14%. The maturity is in 3 years. Interest is paid annually. How much cash does the firm receive at the time of bond issuance?
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- A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. What is the amount of interest the bondholders will receive at the end of the year?A bank holds a 10-year $2 million face value bond with a duration of 8 years. The current price = $950,000. Interest rates are expected to increase from 9% to 11% over next 3 months. Demonstrate how the bank can use a forward contract to hedge the interest rate risk.Bank A issues a bond with a maturity of 3 years, par value of $1,000,000, and annual coupon rate of 2%. Company B buys this bond at date 0. 1. in this situation, who lends money and who borrows money? 2. what are the cash flows received by B if it decides to hold the bond until maturity?
- Suppose a firm is issuing bonds. Each bond has a face amount of $1,000, a stated rate of 8%, and a 10-year term. Coupon (interest) payments are made annually. When the bonds are issued, the market rate for similar bonds is 8%. After a year, the bond is selling for $1,015. What is the yield to maturity?2. Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?2. DEF Company will issue $8,000,000 in 10%, 10-year bonds when the market rate of interest is 7%. Interest is paid semiannually. Required: a. Will this interest structure result in a Premium for DEF company or a Discount? b. How much cash will be received from the issuance of the bond? c. How much will the semi-annual interest payment be on the bond?
- A bond is sold at a face value of $200 with an annual yield of 3%. How much will the bondholder have received in payment from the bond issuer after the bond has reached its maturity date of one year? $200 $406 $6 $206A corporate bond has 18 years to maturity, a face value of $1,000, a coupon rate of 5.3% and pays interest semiannually. The annual market interest rate for similar bonds is 3.1%. What is the value of the bond?A firm issues a $10 million bond with a 7% coupon rate, 4 year maturity, and annual interest payments when market interest rates are 6%. The total interest expense reported by the issuer over the life of the bond will be: O $2,453,4891 $2,800,000 O $2,400,000
- A firm issues a bond with face value of $10,000. The coupon rate is 10% annually to be paid at the end of each year. The bond matures in 10 years. At the date of bond issue, the rate of return on the bond is 12% (YTM). a) Without any calculation, is the bond issued at premium, par or discount? b) Calculate the bond price at the issue date. c) Calculate bond price two years after the issuing date, just after the second coupon is paid. Assume the bonds' YTM do not change throughout the life of the bond.Suppose a firm is issuing 10,000 bonds. Each bond has a face amount of $950, a stated rate of 7.5%, and an 18-year term. When the bonds are issued, the market rate for similar bonds is 6.8%. What is the coupon (interest) payment of this bond? Based on the coupon (interest) payment found in (1.), what is the bond price when issued given the market rate of 6.8%? Based on your answer to (2.), explain why investors are either willing to pay more or less than the face amount of $950? How much capital does the firm raise assuming all 10,000 bonds are sold at the bond price you found in (2.)? Suppose after 8 years an investor decides to sell their bond for $925. What is the yield to maturity after 8 years given the bond price of $925? Based on the yield to maturity you calculated in (5.), is the bond at par, a premium bond, or a discount bond? Why? What is the bond price after the 8th year if the yield to maturity is 7.5%?Suppose that a company issues $10000 face value discount bond maturing in one year.What is the price of this bond if its yield to maturity of 5 percent? a)$9,515 b)$9,615 c)$10,000 d)$10,400
