stocks and bond

Abby Sane decided to buy corporate bonds instead of stock. She desired to have the fixed-interest payments. She purchased 9 bonds of Meg Corporation 11 3/4 9 at 90.00. As the stockbroker for Abby (assume you charge her a $9 commission per bond).

a) Calculate the total cost of the purchase. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total cost $=

(b) Calculate the total annual interest to be received. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total annual interest $=

Current yield %=

Jackie from Saint Louis, MO 10/16/2012

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i fixed the problem

- Jackie K. from Saint Louis, MO 10/17/2012

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1 Answer

The problem with this question is that the coupon amount is not included. The coupon amount is the "interest rate" on the bond. The bond has a face value which is the "principle" on the loan to the corporation. I assume from this question that the face value is $90?

We would need to know the coupon amount and how often that is paid on the bond to the bond holder and the term of the bond.

For part a of the problem, if the face value of the bond is $90, then:

Total cost $= (9 X 90) + (9 X 9) = 891 for the purchase

But the remaining information can only be gathered if the remaining terms of the bond are included.

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stocks and bond

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