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Bond Valuation

Coupon rate on bonds

Curry Corporation is setting the terms on a new issue of bonds with warrants. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 20 warrants that give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value

Compute the implied value of each warrant.

Charles River Company has just sold a bond issue with 10 warrants attached. The bonds have a 20-year maturity, an annual coupon rate of 12.0 percent, and they sold at their $1,000 par value. The current yield on similar straight bonds is 15.0 percent. What is the implied value of each warrant? a. $18.78

Yield Rate on a Year Corporate Bond Explanation

You read in the Wall Street Journal that a 30 day T-bill currently is yielding 8%. Your brother in law, a broker for Madoff Investments has given you the following estimates of current interest rate premiums. Inflation Premium 5% Liquidity Premium 1% Maturity Risk Premium 2% Default Risk Premium 2% Based on thes

Computation of Bond Liability - Messier Inc.

I am having trouble with bonds. Messier Inc. manufactures cycling equipment. Recently the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company's bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for

Motivating Staff Case Study

1. This case study describes several different strategies for attracting and retaining new employees. On the basis of the four drives described in four-drive theory and the needs listed in Maslow's needs hierarchy, identify the drives and needs associated with each of these initiatives. Which needs or drives seem to dominate in

Zero Coupon Bond: Example Problem

Can you help me get started with this assignment? Assume that you just purchased a zero coupon bond with a yield to maturity of 9 percent. The bond matures in 12 years, and has a face value of $1,000. Your tax rate is 25 percent. What is the dollar amount of the tax that you will pay on the bond at the end of the first year o

Future & Present Values (401k account, Electo Corporation)

Can you help me get started on this assignment? 1. You have just made your first $4,000 annual contribution to your 401k account. Assuming you earn 8% on your money and invest for 20 years (twenty annual $4,000 contributions), to what value will your account grow after 20 years? 2. Use the same numbers as in question 1.

Describing a Bond

What is a bond? What are some features of a bond? How do you value bonds? What factors can affect that value?

Yield to maturity, price, value of stock, required rate of return

1. Wilson Wonders' bonds have 12 years remaining to maturity. interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10% the bonds sell at a price of $850. What is their yield to maturity? 2. Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mat

Accounting treatment of financial lease and operating lease.

Clavicle Techtronic's, Inc., is authorized to issue $3,600,000 in bonds on June1. The bonds carry a face interest rate of 9 percent, which is to be paid on June 1 and December 1. 1. Prepare entries in Journal form (Excel) for the issue of the bonds by Clavicle Techtronic's, Inc., under the assumptions that (a) the bonds are

Bonds Issued at a discount and a Premium for Heisenberg Corporation

Heisenberg Corporation issued bonds twice during 20x7. A summary of the transactions involving the bonds follows. 20x7 Jan. 1 Issued $6,000,000 of 9.9 percent, ten-year bonds dated January 1, 20x7, with interest payable on June 30 and December 31. The bonds were sold at 102.6, resulting in an effective interest rate of

Preparing Journal Entries for Bond Issues: Example Problem

A company issued two unrelated bond issues this year, as follows: a. $350,000 of 8%, 20-year bonds were issued at par on April 1. The bonds pay semi-annual interest on April 1 and October 1. b. $500,000 of 7%, 15-year bonds were issued at par on February 1. The bonds pay semi-annual interest on January 1 and July 1.

Analyzing risk (implied, default and more)

Can you help me get started with this assignment? Suppose the following data on yields from holds: 3-month T-Bill 5.0% 30-year T-Bond 7.2% 30-year AAA Corporate 8.6% 30-year Municipal 6.02% 1. Assume the same risk for 30-year AAA Corporate bonds and 30-year Municipal Bonds. If you are indifferent bet

Calculating selling price, current yield and more...

Can you help me get started with this assignment? A manufacturer has experienced a market reevaluation lately due to a number of lawsuits. The firm has a bond issue outstanding with 20 years to maturity and a coupon rate of 7% (paid annually). The required rate has now risen to 10%. The par value of the bond is $1,000. 1

Justify and calculate market price of Wal-Mart debt, equity

Attached is Walmart's 2009 annual report. Using the most recent Wal-Mart financial information, please justify/calculate the current market price of Wal-Mart's debt and equity, using two capital valuation models (one for debt and one for equity). Please show calculations that support the findings, including those involvin

Bond valuation : explained

The Allison Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years and Bond S has a maturity of one year. Interest is paid annually. A) What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 7 perce

Finance

A summary that indicates how the concepts and principles from the text problem sets for bond valuation, stock valuation, required return for a preferred stock and CAPM apply to health care finance

Determining Present Value of a Bond: ABC Health Med.

ABC Health Med. has a $1,000 par value bond with an 8 percent rate outstanding. The bond has 12 years remaining to it maturity date. If interest is paid semiannual interest, what is the value of the bond when the required return is 12 percent. Show all work.

Bond Prices

An outstanding issue of Public Express Airlines debentures has a call provision attached. The total principal value of the bonds is $250 million, and the bonds have an annual coupon rate of 8 percent. The total cost of refunding would be 12 percent of the principal amount raised. The appropriate tax rate for the company is 35 pe

Bonds with Identical Maturity Time but Different Coupon Rates

Create an example where two bonds have identical maturity time. The difference is their coupon rates. Then, for the following year, decrease the ongoing market rate by 1 or 2 or 3 percent, and calculate the change in the price of both bonds. Which one provides the largest positive change? Why? Please illustrate your answer

Finance- graduate level

Corporate Financial Management Problems Ch. 17 B4 B4. (Coverage ratios) Mi Furst, Inc., has $100 million of earnings before interest and taxes and $40 million of interest expense. a. Calculate Mi Furst's interest coverage ratio. b. Calculate the pro forma interest coverage ratio assuming the issuance of $100 million of 10%

Current Price and Yield to maturity.

1). CR Inc. has 7% coupon bonds with 10 years to maturity. The bond requires annual coupon payments. The face value is $1,000. Calculate the current price of the bond if the yield to maturity is 9%. (work this problem using Excel spread sheet also) 2). Neuralware Company has issued 12% coupon bonds with $1,000 face value

Are 30 year Treasury Bonds or 90-day Treasury bills risk less?

a. Suppose you own $1 million worth of 30-year Treasury bonds. Is this asset riskless? b. You own $1 million worth of 90-day Treasury bills. You "roll over" this investment every 90 days by reinvesting the proceeds in another issue of 90-day Treasury bills. Is this investment riskless? c. Can you think of an asset that

Debt Investments - Davison Carecenters, Inc.

Davison Carecenters Inc. provides financing and capital to the health-care industry, with a particular focus on nursing homes for the elderly. The following selected transactions relate to bonds acquired as an investment by Davison, whose fiscal year ends on December 31.2008 Jan. 1 Purchased at par $2,000,000 of Hannon Nurs

Expected rate of return ..

RETURNS State of Economy Probability of State Stock A Stock B Stock C Boom .10 22% 18% 5% Normal .85 14% 13% 11% Recession .05 -28% 4% 17% 5. Phil has a portfolio comprised of 60 percent stock A, 5 percent stock

Compute the Promised Yield to Maturity for a callable bond

Assume you purchassed an 8 percent, 20-year, $1,000 par, semiannual payment bond priced at $1012.50 when it has 12 years remaining until maturity. Compute its promised yield to maturity and its yield to call if the bond is callable in three years with an 8 percent premium. For the promised yield to maturity, does n = 24 or 40

Bonds Payable - callable (Riley Co.)

Riley Co. has outstanding $40 million face amount of 15% bonds that were issued on January 1, 1997, for $39,000,000. The 20-year bonds mature on December 31, 2016, and are callable at 102 (that is, they can be paid off at any time by paying the bondholders 102% of the face amount). Required: a. Under what circumstances wou