study questions

Wachowicz Corporation issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?
$1,077.01
$1,104.62
$1,132.95
$1,162.00
$1,191.79
Moerdyk Corporation's bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 4.75%, based on semiannual compounding. What is the bond’s price?
1,063.09
1,090.35
1,118.31
1,146.27
1,174.93
In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows:
Long-term debt (bonds, at par) Preferred stockCommon stock ($10 par) Retained earnings
Total debt and equity
$10,000,000 2,000,000 10,000,000 4,000,000 $26,000,000
The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?
$5,276,731
$5,412,032
$5,547,332
$7,706,000
$7,898,650
n = 10 X 2 periods = 20
Annual rate 4% so I/Y = 4%/2 = 2%
PMT = (% annual coupon X par value) / 2 = (4% X 1000) / 2 = 20 FV= 1,000
4. 5-year Treasury bonds yield 5.5%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.4%. What is the real risk-free rate, r*?
2.59%
2.88%
3.20%
3.52%
3.87%
Basic equation: r = r* + IP + MRP + DRP + LP rT-bond5.50% IP 1.90%
MRP 0.40%
LP and DRP0.00% r* = rT-bond – IP – MRP3.20%
Crockett Corporation's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk- free rate is r* = 2.80%, the default risk premium for Crockett's bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP =