1. Gray House is issuing bonds paying $110 annually that will mature ten years from today. The bond is currently selling for $970. The face value of the bonds is $1,000
- a) Coupon Rate
- b) Current Yield
- c) Yield To Maturity
2. What are the advantages and disadvantages of using debt as a form of financing? Please state two advantages and two disadvantages.© BrainMass Inc. brainmass.com June 3, 2020, 10:54 pm ad1c9bdddf
1 a) Coupon rate = Annual payments / face value = 110/1000=11%
b) Current yield = Annual payments / current price = 110/970=11.34%
Current Price =Annual Payments*PVIFA(YTM,10 Years)+ face value *PVIF(YTM, 10 years)
970=110*PVIFA(YTM,10 years)+1000*PVIF(YTM,10 Years)
Look at the values in table for 10 years and solve ...
The advantages and disadvantages of using debt as a form of financing is determined.