Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. 8. several major companies (like disney and at&

8. Several major companies (like Disney and AT&T) have issued "Century Bonds." These bonds pay...

70.2K

Verified Solution

Question

Accounting

8. Several major companies (like Disney and AT&T) have issued "Century Bonds." These bonds pay regular semi-annual coupons, but do not mature until 100 years after they are issued. Some critics have stated that there is huge risk that you won't get the principal repaid because you just can't predict what will happen to the company in 100 years. For this question assume that the company has just issued a $1000 par, 8% coupon bond with semi-annual payments. a) If current yield to maturity for these bonds are 8%, what is the current price of the bond? What is the present value of the face value only? Finally, what proportion of the bond's price does the principal repayment make-up? b) What is the present value of the first 40 years of coupon payments? What proportion of the bond's price does the first 40 years coupon payment make-up? c) Suppose you think you can live for another 60 years, by which time, due to the loose monetary policy of the Fed, the yield to maturity of the same bond will be 20%. How much will the bond be worth at that time?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Calculate the PH of the following solutions a) 25g HCIO4 in 500ml aqueous solution b) 0.2M hydrofluoric...

Chemistry
Q

Be able to list 5 functions of blood and EXPLAIN (using complete sentences) 3 ways that...

Medical Sciences
Q

For this assignment you will choose 1 or 2 social media platform(s) (Instagram, Facebook, Twitter, YouTube,...

Psychology
Q

QUESTION 1 Study a manufacturing company or environment of your choice. Report on the following: 1.1 Products and...

Mechanical Engineering
Q

MUST ANSWER A, B and C Consider a pumped hydro system that is used for energy...

Electrical Engineering
Q

A company manufactures Products A, B, and C. Each product is processed in three departments: I,...

Advance Math
Q

A platform is suspended by four wires at its corners The wires are 3m long...

Physics
Q

Multiply in the indicated base 358 x218 358 x 218

Basic Math
Q

2 14 The shear strengths of 100 spot welds in a titanium alloy follow Construct...

Basic Math
Q

Question Express the given expression without logs in simplest form Assume all variables represent positive...

Statistics
Q

QUESTION 14 When collaborating, the team should put all decisions into writing. O True O...

Accounting
Q

Raven Company has a target of earning $70,900 pre-tax income. The contribution margin ratio is...

Accounting