1. Find the value of a bond with the following characteristics: (a) face value of $1,000, (b) 8% coupon rate, (c) the bond matures in 14 years, (d) the market rate of interest is 6%. 2. Is the bond priced in question 1 selling at a discount or premium to its par value? 3. Using the information from question 1: the market r
Â?¢ The Firm has the following capital structure: (a) $100,000 in Debt, (b) $200,000 in Equity, and $50,000 in Preferred Stock. â?¢ Financial analysts have gathered the following information about the firmâ??s common stock: (a) the dividend that was just paid was $2.00, (b) the return on the market is estimated to be 10%,
1) Calculate the Value of the Bonds under the following assumptions: 2) What do you conclude about the relative sensitivity of bond prices to changes in interest rate? a) Longer maturities relative to shorter maturities? b) High coupon bonds relative to lower coupon bonds?
Looking for the info on following quote sheets for fixed income (treasury notes etc). to be filled in completely. Also, some quick bond calculations on sheet 2. thanks
Please help with the following finance problem regarding bond cash flows using step by step calculations. Bond Cash Flows: RRR issued 250,000 bonds at $1,000 par value that will mature in 25 years and will pay a coupon interest rate of 6% every year. Indicate the total cash flows for the corporation and the bondholder for t
1. What are open-market operations? How are they conducted to fight inflation and recession? Write your answers completely. 2. Why does the U.S. dollar fluctuate with other currencies? Explain thoroughly this with regard to: (a) Interest rates (b) Trade deficits
Read the following statements in italic and answer the two questions that follow. â??On the one hand, sound traditional valuation models like the DCF method require well-functioning capital and products markets. On the other hand, it is no secret that the recent financial and economic crises have caused the collapse or near
Having previously identified the location of its Greenfield investment, Acme, a multi-billion public MNE that is incorporated in the U.S., must next obtain external financing for its proposed overseas production facility. It has been estimated that the acquisition will cost $500M and all funds will be secured in the U.S. Your jo
Please see the attachment. In exchange for a $20,000 payment today, a well known company will allow you to chose one of the alternatives showing in the following table. Your opportunity cost is 11% Alternative Single Amount A $28,500 at end of 3 years B $54,000 at end of 9 years C $160,000 at end of 20 years A.
Below are events that might affect the supply of money, the demand for money, and/or the interest rate. Explain how each event may affect these three economic variables. Use graphs if appropriate. 1.The Fed buys securities in the open market. 2.The reserve requirement is increased. 3.Consumers decide to save and reduce th
Zumwalt Corporation's Class S bonds have a 12-year maturity, $1,000 par value, and a 5.75% coupon paid semiannually (2.875% each 6 months), and those bonds sell at their par value. Zumwalt's Class A bonds have the same risk, maturity, and par value, but the A bonds pay a 5.75% annual coupon. Neither bond is callable. At what pri
Please see attached document. The founders were relatively wealthy, mid-30s individuals when they started the company, and had enough confidence in their concept to commit most of their own funds to the new venture. Still, the capital requirements brought on by extremely rapid growth soon exhausted their personal funds. They
Please see attachment. The founders were relatively wealthy, mid-30s individuals when they started the company, and had enough confidence in their concept to commit most of their own funds to the new venture. Still, the capital requirements brought on by extremely rapid growth soon exhausted their personal funds. They were forc
The spread between ACME corporationâ??s note with a coupon of 6.5 percent, seven-year remaining term, and selling for 101-3/8 and ACME corporationâ??s debenture with a coupon of 9.5 percent, 18-year remaining term and selling for 98-3/4 is: Please show calculations.
A firm's current balance sheet is as follows: Assets $100 Debt $10 Ã? Ã? Equity $90 a. What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the following information? Debt/ After-Tax Cost of Equity Cost of Assets
Please look at attached document. 10-1 AFTER-TAX COST OF DEBT The Heuser Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Heuser's after-tax cost of debt?
Please see the attachment. 7-3 The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is that stateme
1. Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield. At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni? Choose one of these answers? 15.4% 23.7% 39.5%
An analyst is evaluating two companies, A and B. Company A has a debt ratio of 50% and Company B has a debt ratio of 25%. In his report, the analyst is concerned about Company B's debt level, but not about Company A's debt level. Which of the following would best explain this position? a. Company B has much higher operatin
Suppose you are in corporate treasury and placing a $50 million bond issue with a 5.56 percent coupon and a 20-year maturity. Interest is paid semiannually. On the day of the issue, prior to the formal go-ahead by the CFO, your investment bankers note that two other competing issues are being offered and suggest that your issue
Please answer the following problem in an Excel file. Suppose you are considering purchasing a 10% annual coupon bond, with 15 year remaining. The par value is $1000. Given the rating of the bond investors are requiring 15% return on bonds of this type. What is your estimate of the bond's value, in other words how much are
Company has an outstanding bond issue with a 7-7/8 coupon, market price of 103-5/8 (percent of 100% par, in 32nds.), semiannual coupon payments, and 12 years to maturity. What is the YTM of this? Please show calculations.
Calculate the present value of a bond that pays a coupon rate of 7% per year for 20 years, and matures in 20 years at its face value of $1000, using each of the following current market interest rates as the discount rate:(a) 5%; (b) 7%; (c) 9%. Show your calculations.
Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight debt with an 8% annual coupon. The second issue consisted of 20-year bonds with a 6% annual coupon and attached warrants. Both issues sold at their $1,000 par values. What is the implied value of the warrants attached to each bond?
A firm has the following capitalization: Debt $125,000,000 Equity $260,000,000 Total Capitalization $385,000,000 (1) Adjust the capitalization to an issuance of $50,000,000 in bonds with warrants exercisable at $32 per share. Each bond carries 2.375 warrants and the bonds have a face value of $1,000. Assume the warrant
You have just purchased a 10 year $1000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid each six months. If you expect to earn 10 percent simple rate of return on this bond how much did you pay for it? You expect to receive $1000 at the end of each of the next three years. You wi
You're requested to invest USD 25,000,000 in a bond portfolio consisting of just two bonds. Bond X has a duration of 2.75 years, and bond Y has a duration of 6.25 years. The portfolio is to have an investment horizon of 5 years. How much of each bond issue should you purchase to immunize your portfolio? Please provide meth
Show work for all 3 questions in a word document. Show work for all 3 questions in a word document. A bond has a $1000 face value, a market price of $1,115, and pays interest payments of $90 every year. What is the coupon rate? A 7 percent bond has a yield to maturity of 6.75 percent, 10 years to maturity, a face value
Value of acquisition and NPV of mergers. loatation costs and refunding NPV. NAL and Lessee's analysis. Conversion price, bonds with warrants, and convertibles. Please see the attachment. 1. The "preferred" feature of preferred stock means that it normally will generate a higher total return for the stockholder than comm
Calculate convertible bond. Please see the attachment. Florida Enterprises is considering issuing a 10-year convertible bond that will be priced at its $1,000 par value. The bonds have an 8.0 percent annual coupon rate, and each bond can be converted into 20 shares of common stock. The stock currently sells at $40 a share,