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Usimov [2.4K]
3 years ago
14

Cailin Corp issues 10,000 callable bonds with same coupon rate and years to maturity in part A, where coupon rate is 8%, maturit

y is 10 years, and the yield is 5%. The grace period for the call is 5 years and the call price of this bond is $1,000. What would be the current price of this callable bond
Business
1 answer:
lisabon 2012 [21]3 years ago
7 0

Answer:

$955.37 per bond

Explanation:

Callable bonds are generally worth less than normal bonds since the call option decreases the value of the bondholder while increases the value of the issuer. Bonds will only be called if the interest rate falls below a certain level and calling them is cheaper (form the issuer's point of view) than keep paying high interest rates.

market price of callable bonds:

  • PV of face value = $1,000 / (1 + 5%)¹⁰ = $613.91
  • PV of coupon payments = $80 x 7.7217 (PV annuity factor, 5%, 10 periods) = $617.74
  • Price of call option = [(1 + 5%)⁵ x $1,000] - $1,000 = $1,276.28 - $1,000 = $276.28

current market price of callable bonds = $613.91 + $617.74 - $276.28 = $955.37

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garik1379 [7]

Answer:

$876,205.93

Explanation:

Calculation for the value of the Treasury note

FV= 1,000,000

N=3*2

N=6

PMT=3%*1,000,000/2

PMT=30,000/2

PMT= 15,000

I/Y=7.7/2

I/Y= 3.85

Using financial calculator to find the present value of the treasury note

Present Value = $876,205.93

Therefore the present value of the treasury note will be $876,205.93

3 0
3 years ago
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EastWind [94]

Answer:

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Explanation:

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In contrast to the positive analysis, the normative analysis responds how the law should achieve efficiency objectives. This analysis assumes that efficiency is an objective that law should reflect and that legal norms should change when they fail. From this perspective, efficiency is a social value that the Law should promote.

3 0
3 years ago
When GaGa began adding novelty bars in new flavors, what was the effect on the width and depth of its product mix?
Yanka [14]

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6 0
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Josh separated people who wanted a high quality lawn mower from people who wanted a low priced lawn mower, then saw if different
Vsevolod [243]

Answer:

The correct answer is letter "D": behavioral.

Explanation:

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Tomtit [17]

Answer:

B)

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