Question 8.4: Hindenberg, Inc., has a 10-year bond that is priced at $1,10...

Fundamentals of Corporate Finance

Hindenberg, Inc., has a 10-year bond that is priced at $1,100.00. It has a coupon of 8 percent paid semiannually. What is the yield to maturity on this bond?

The blue check mark means that this solution has been answered and checked by an expert. This guarantees that the final answer is accurate.
Learn more on how we answer questions.

Related Answered Questions

Question: 8.1

Risk Taking SITUATION: You work for the treasurer of a large manufacturing corporation where earnings are down substantially for the year. The treasurer’s staff is convinced that interest rates are going to decline over the next three months, and they want to invest in fixed-income securities to ...

Verified Answer:

DECISION: First, the staff’s strategy is based on ...

Question: 8.A.4

A Bond’s Yield to Maturity PROBLEM: You can purchase a U.S. corporate bond from your broker for $1,099.50. The bond has six years to maturity, and an annual coupon rate of 5 percent. Another broker offers you a dollar Eurobond (a dollar-denominated bond sold overseas) with a yield of 3.17 percent ...

Verified Answer:

We can solve for the yield to maturity using a fin...

Question: 8.A.3

The Price of a Bond PROBLEM: An investor is considering buying a U.S. corporate bond with an eight-year maturity and a coupon rate of 6 percent. Similar bonds in the marketplace yield 14 percent. How much should the investor be willing to pay for the bond? Using Equation 8.1 (or 8.2), set up the ...

Verified Answer:

Using Equation 8.1 (or 8.2), the setup is as follo...

Question: 8.A.2

Bond Pricing with Semiannual Coupon Payments PROBLEM: A corporate treasurer decides to purchase a 20-year Treasury bond with a 4 percent coupon rate. If the current market rate of interest for similar Treasury securities is 4.5 percent, what is the price of the bond? APPROACH: Treasury securities ...

Verified Answer:

We can enter the appropriate values on the financi...

Question: 8.A.1

Pricing a Bond PROBLEM: Your stockbroker is trying to sell you a 15-year bond with a 7 percent coupon, and the interest, or yield, on similar bonds is 10 percent. Is the bond selling for a premium, at par, or at a discount? Answer the question without making any calculations, and then prove that ...

Verified Answer:

To prove the answer is correct (or wrong), we can ...

Question: 8.1

Calculate the price of a five-year bond that has a coupon of 6.5 percent paid annually. The current market rate is 5.75 percent. ...

Verified Answer:

The time line and calculations for the five-year b...

Question: 8.5

Highland Corp., a U.S. company, has a five-year bond whose yield to maturity is 6.5 percent. The bond has no coupon payments. What is the price of this zero coupon bond? ...

Verified Answer:

You have the following information about Highland’...

Question: 8.2

Bigbie Corp. issued a five-year bond one year ago with a coupon of 8 percent. The bond pays interest semiannually. If the yield to maturity on this bond is 9 percent, what is the price of the bond? ...

Verified Answer:

We can find the price of Bigbie Corp.’s bond as fo...

Question: 8.3

Rockwell Industries has a three-year bond outstanding that pays a 7.25 percent coupon and is currently priced at $913.88. What is the yield to maturity of this bond? Assume annual coupon payments. ...

Verified Answer:

We start with a time line for Rockwell’s bond: Us...