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22)A $1,000 par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,005. Further assume Ms. Bright paid 20 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. a.What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.)        Price of the bond$    b.What is her dollar profit based on the bond’s current price? (Do not round intermediate calculations and round your answer to 2 decimal places.)   Dollar profit$    c.How much of the purchase price of $1,005 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.)   Purchase price paid in cash$    d.What is Ms. Bright’s percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)   Percentage return%  

 
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Question 21) Fifteen years ago, the Archer Corporation borrowed $6,300,000. Since then, cumulative inflation has been 56 percent (a compound rate of approximately 3 percent per year). a. When the firm repays the original $6,300,000 loan this year, what will be the effective purchasing power of the $6,300,000? (Hint: Divide the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Effective purchasing power $ b. To maintain the original $6,300,000 purchasing power, how much should the lender be repaid? (Hint: Multiply the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Loan repayment $

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bond

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20)You buy an 8 percent, 15-year, $1,000 par value floating rate bond in 1999. By the year 2014, rates on bonds of similar risk are up to 10 percent. What is your one best guess as to the value of the bond?   Value of the bond

 
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coupon rate bond

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18)A 20-year, $1,000 par value zero-coupon rate bond is to be issued to yield 11 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a.What should be the initial price of the bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)   Bond price$    b.If immediately upon issue, interest rates dropped to 9 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)   Bond price$    c.If immediately upon issue, interest rates increased to 13 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)   Bond price$    

 
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