Principles of Finance Homework

| March 13, 2016

1)

Merton Enterprises has bonds on the market making annual payments, with 14 years to maturity, and selling for $972. At this price, the bonds yield 8.4 percent.

Required:

What must the coupon rate be on Merton’s bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16). )

2)

App Store Co. issued 17-year bonds one year ago at a coupon rate of 6.3 percent. The bonds make semiannual payments.

Required:

If the YTM on these bonds is 5.5 percent, what is the current bond price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

3)

Volbeat Corporation has bonds on the market with 20 years to maturity, a YTM of 11.3 percent, and a current price of $935. The bonds make semiannual payments.

Required:

What must the coupon rate be on the bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

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