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Liono4ka [1.6K]
2 years ago
8

Calculate the value of a bond that matures in 12 years and has a $ 1 comma 000 par value. The annual coupon interest rate is 13

percent and the​ market's required yield to maturity on a​ comparable-risk bond is 11 percent.
Business
1 answer:
dem82 [27]2 years ago
3 0

Answer:

Price of bond=$ 1,129.847

Explanation:

T<em>he value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).</em>

Value of Bond = PV of interest + PV of RV

Step 1

PV of interest payments

annul interest payment

= 13% × 1000 = 130

PV = A × ( (1- (1+r)^(-n))/r

Annual yield - r=  11% per annum

Total period to maturity- n = 12 years

PV of interest  

=130× (1- 1.11^(-12) )/0.11

= 844.00

Step 2

PV of Redemption Value

= 1,000 × (1.11)^(-12)

= 285.84

Step 3

Total PV = 844.00 + 285.84 = 1129.847123

Price of bond=$ 1,129.8471

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Blackstone Technology is planning to invest in some project using external equity. The company has a beta of 1.1. The return on
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Answer:

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Explanation:

Cost of equity = required rate of return + flotation cost

The Capital assets pricing model would be used to determined  the required rate of return

<em>The capital asset pricing model (CAPM): relates the price of a share to the market risk or systematic risk. The systematic risk is that which affects all the all the economic agents, e.g inflation, interest rate e.t.c  </em>

Using the CAPM , the required rate of return is given as follows:  

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β- Beta

Rm- Return on market

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DATA

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