HSI Finance Assingment Help With Solution
What is the yield to maturity (YTM) of a zero coupon bond with a face value of $1,000, current price of $730 and maturity of 7 years? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis.
Suppose Wolverine Steel Company wishes to issue a $100,000 bond with a maturity of 8 years to raise $80,294. The market requires a yield to maturity (YTM) of 9.0% for this company’s borrowing/debt. How much coupon will the company have to pay every six months?
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Three years ago, you invested in a zero coupon bond with a face value of $1,000 that had a YTM of 11.5% and 14 years left until maturity. Today, that bond has a YTM of 6.5%. Due to a financial emergency, you are forced to sell the bond. What is your capital gain/loss, which is defined as the dollar gain/loss relative to the price of the bond when you bought it? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis.
Hard Spun Industries (HSI) has a project that it expects will produce a cash flow of $1.8 million in 13 years. To finance the project, the company needs to borrow $1.0 million today. The project will also produce intermediate cash flows of $100,000 per year that HSI can use to service coupon payments of $50,000 every six months. Based on the risk of this investment, market participants will require a 11.0% yield. If HSI wishes a maturity of 13 years (matching the arrival of the lump sum cash flow), what does the face value of the bond have to be? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis.
Five years ago, Highland, Inc. issued a corporate bond with an annual coupon of $7,000, paid at the rate of $3,500 every six months, and a maturity of 25 years. The par (face) value of the bond is $1,000,000. Recently, however, the company has run into some financial difficulty and has restructured its obligations. Today’s coupon payment has already been paid, but the remaining coupon payments will be postponed until maturity. The postponed payments will accrue interest at an annual rate of 7.5% per year and will be paid as a lump sum amount at maturity along with the face value. The discount rate on the renegotiated bonds, now considered much riskier, has gone from 7.0% prior to the renegotiations to 14.5% per annum with the announcement of the restructuring. What is the price at which the new renegotiated bond should be selling today? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis.
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