Search 75,605 tutors
FIND TUTORS
Ask a question
0 0

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 $=

(c) Calculate the current yield. (Round your answer to the nearest tenth percent. Omit the "%" sign in your response.)

Current yield %=

Comments

Comment

Tutors, please sign in to answer this question.

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.

 

Comments

Comment