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# 7/26/2014 3:51 Bonds Valuation and Cost of Capital Bond Price a) Assume that UPC is issuing a 10-year, \$10,000 par value bond with a 6% annual coupon...

Using the attached Excel file, respond to the following questions:
Assume that UPC is issuing a 10-year, \$10,000 par value bond with a 6% annual coupon if its required rate of return is 6%. What is the value of this bond? Show your calculations in the Excel file.
If the coupon rate changes to 7%, would UPC be issuing a discount or a premium bond? Show your calculations in the Excel file.
If the coupon rate changes to 5%, would UPC be issuing a discount or a premium bond? Show your calculations in the Excel file.
What are the values of the 5%, 6%, and 7% coupon bonds over time if the required return remained at 6%? Complete the table for years 1–8.
Assume that UPC was successful in generating \$15 million from its bond issue. Design a strategy for the financing of project C. Respond using a Word document.

7/26/2014 3:51 Bonds Valuation and Cost of Capital Bond Price N 10 Years to Maturity CPN % 6% Coupon Rate YTM 6% Yield-To-Maturity Par Value \$10,000 PRICE \$6,000.00 Discount or Premium b) If the coupon rate changes to 7%, would UPC be issuing a discount or a premium bond? N 10 CPN % 7% YTM 6% Par Value \$10,000 PRICE \$7,000.00 c) If the coupon rate changes to 5%, would UPC be issuing a discount or a premium bond? N 10 CPN % 5% YTM 6% Par Value \$10,000 PRICE \$5,000.00 6% coupon bond Maturity 7% coupon bond 0 \$9,263.99 \$10,000 \$10,736.01 1 \$9,319.83 \$10,000 \$10,680.17 2 \$9,379.02 \$10,000 \$10,620.98 3 \$9,441.76 \$10,000 \$10,558.24 4 \$9,508.27 \$10,000 \$10,491.73 5 \$9,578.76 \$10,000 \$10,421.24 6 \$9,653.49 \$10,000 \$10,346.51 7 \$9,732.70 \$10,000 \$10,267.30 8 \$9,816.66 \$10,000 \$10,183.34 9 \$9,905.66 \$10,000 \$10,094.34 10 \$10,000.00 \$10,000 \$10,000.00 a) Assume that UPC is issuing a 10-year, \$10,000 par value bond with a 6% annual coupon if its required rate of return is 6%? What is the value of this bond? A premium bond is one in which its present value or price is higher than its face discount bond is one in which its present value or price is lower than its face or A premium bond is one in which its present value or price is higher than its face discount bond is one in which its present value or price is lower than its face or d) Values of the 5%, 6%, and 7% coupon bonds over time if the required return remained at 6%. Complete the table for years 1-8. 5% coupon bond

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