Eon Satellite Corporation (ESC) has an issue of 8-year, 11% annual coupon bonds

Question

Eon Satellite Corporation (ESC) has an issue of 8-year, 11% annual coupon bonds outstanding. The bonds, which were originally issued 12 years ago, have a face value (FV) of $1,000, a yield-to-maturity (YTM) of 7%, and are noncallable. What is the current market price of ESC's bonds? O $1,053.02 O $1,362.74 O $1,238.85 $1,548.56 Are the bonds of Eon Satellite Corporation selling at a discount, at par, or at a premium? O Premium O Par O Discount What is the current yield on Eon Satellite Corporation's outstanding bonds? ? 8.88% ? 8.07% 7.10% ? 10.45% What is the expected one-year capital gain yield on the bonds of Eon Satellite Corporation? 0-221% -1,88% 0-171% O-1.50%

Explanation / Answer

Price this year = c ie. 110 * A/f(7%,8) + par value ie. 1000 * F/f(7%,8) 110*5.971 + 1000*0.582 = 1238.85 1) Answer : $1238.85 2) Answer : At Premium ( as par value is $1000) 3) answer : 8.88% As, Current yield = 110/1238.85 = 8.88% Price next year = c ie. 110 * A/f(7%,7) + par value ie. 1000 * F/f(7%,7) 110*5.389 + 1000*0.523 = 1215.79 4) Answer : -1.88% As, (1215.79-1238.85)/1238.85 = -1.88%

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.