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Convertible bond and rates of return

Laser Electronics Co. has $30 million in 8% convertible bonds outstanding. Conversion rate is 50; the stock price is $17; and the bond matures in 15 years. The bonds are currently selling at a conversion premium of $60 over their conversion value. If the price of the common stockrises to $23 on this date next yesr, what would

Interest payments to the US Debt

What does the interest paid each year on the US debt mean? Compare this feature to that of a household and a hypothetical household's debt load?

Price a bond should sell at

A bond recently issued matures in 15yrs. They have a par value of $1000 and an annual coupon of 6%. If the current market interest rate is 8% at what price should the bonds sell? I have tried using Excel and the numbers don't make sense when I put them into the formula.

Finance Questions

These are a few questions I did not quite understand. Would you please assist? * If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT? (Points: 10) The lower the company's TIE ratio, other things held constant, the lower the inter

Clark Company - Bank Reconciliation

Resource: Fundamental Accounting Principles Problem 8-4A including the Analysis Component Use the spreadsheet, Appendix B, to complete problem 8-4A. Use the tabs labeled SP08-04A and Given P08-04A The following information is available to reconcile Clark Company's book balance of cash with its bank statement cash balan

Hannon Home Products, Inc., recently issued $430,000

Hannon Home Products, Inc., recently issued $430,000 worth of 8 percent convertible debentures. Each convertible bond has a face value of $1,000. Each convertible bond can be converted into 28 shares of the firm's common stock anytime before maturity.The current price of Hannon's common stock is $31.25 per share, and the mar

Multiple choices

Dear Tutor, I don't trust myself so I would like to get a second opinion on these. Please answer the multiple choice questions and show any work you needed to do to obtain a given answer, if needed. Thank you ____ 1. Which of the following could explain why a business might choose to organize as a corporation rather

Multiple Choice - Finance

1. The primary objective of business financial management is to a. maximize total corporate profit. b. maximize net income. c. minimize the chance of losses. d. maximize shareholder wealth (i.e. stock price). 2. Theoretically, stock price is not directly d

Computing Steps

Problem: The balance sheets of Hutter Amalgamated are shown below. If the 12/31/2005 value of operations is $756 million, what is the 12/31/2005 value of equity? [ANSWER: $416 MILLION] * [Please show the computing steps by which the answer to this problem was derived]. Balance Sheets, December 31, 2005 (Millions

Optimal Portfolio Decisions

The James Bond Fund is a mutual fund (open-end investment company) with an objective of maximizing income from a widely diversified corporate bond portfolio. The fund has a policy of remaining invested largely in a diversified portfolio of investment-grade bonds. Investment-grade bonds have high investment quality and receive a

What drives bond prices?

1. Do normal demand/supply fluctuations move bond prices? 2. Or is it based on changes in the required yield (which is factored into the bond calculation, thus changing the prices) If it's based on 1. then to changes in required yield force people to buy and sell? What market forces change the required yield? Is this based

Securities, bonds, preferred stock

1. True / False _______ Correlation is a measure of relationship between two securities. _______ Standard Deviation is calculated by taking the future values of present values. _______ A beta of 1.8 is less risky than the market. _______ Australia uses the Euro as their currency. _______ It's always

Economics Questions

1. What is the Future Value at the end of 17 years of depositing $1,750 into a Mutual Fund today, assuming the fund is expected to earn 12% a year? 2. You are considering the purchase of a bond with a semiannual coupon of $40, Ten years to maturity, a face value of $1,000, and a current market price of $1,000. a. A

Calculate: Bond Price

Question: Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity: a. 7 percent b. 10 percent c. 13 percent

Monetary Analysis

Suppose the Federal Reserve surprises everyone by sharply raising the federal funds rate. Explain how this action is likely to affect the nominal interest rates on (i) three-month Treasury bills (ii) ten-year Treasury bonds (iii) ten-year AAA corporate bonds and (iv) ten-year junk bonds. Compare the sizes

Financial Economics

4. Consider a bond paying a coupon rate of 6% per year semiannually (i.e. it pays $30 every six months) when the market interest rate at all maturities is only 2.5% per half year. The bond has three years until maturity. a. What is the bond's price today? b. What will the bond's price be in six months after the next cou

1) If interest rate parity holds, what is the yield today on 1-year, risk-free Japanese securities? 2) If 9 percent after-taxes is the investors required return, what before-tax rate would the domestic bond need to pay to provide that after-tax return?

1) In the spot market, 1 U.S. dollar can be exchanged for 121 Japanese yen. In the 1-year forward market, 1 U.S. dollar can be exchanged for 125 Japanese yen. The 1-year, risk-free rate of interest is 5.2 percent in the United States. If interest rate parity holds, what is the yield today on 1-year, risk-free Japanese securiti

Financial Economics

Your investment horizon is one year. You observe that the government is offering a completely safe one-year Treasury instrument with a 5 percent return. You also assume that the historical returns above give you the best available information about future expected returns, variances and covariances for the alternative asset cl

Explaining and Calculating WACC

Please help with the following problem. A firm has 2,000,000 shares of common stock outstanding with a market price of $2.00 per share. It has 2,000 bonds outstanding, each selling for $1,200. The bonds mature in 15 years, have a coupon rate of 10% and pay coupons annually. The firm's beta is 1.2, the risk free rate is 5%, a

Cash Conversion Cycle

1) For the Morton Inc Company, the average age of accounts receivable is 60 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days. Assuming a 365-day year, what is the length of the firms cash conversion cycle? a. 87 days b. 90 days c. 65 days d. 48 days e. 66

Interest rate derivative management

A fund wishes to sell (write) European calls on 2-year, 4.5% coupon Treasury notes. The notes currently sell for $98.90. The one-year forward rate (r0) is 4.65 percent. The assumed one-year forward rate one year from now (r1,L) is 5.0 percent. The standard deviation is 10 percent. Fill in the seven boxes of the following binomia

Multiple Choice Questions on Bonds, Risk

1) Franklin Corporation is planning to issue new 20-year bonds. Initially, the plan was to make the bond non-callable. If the bond were made callable after 5 years with a 5% call premium, how would this affect the bond's required rate of return? a. It is impossible to say without more information. b. Because of the


Jones Corp's EBITDA last year was $385,000 (= EBIT + depreciation + amortization), its interest charges were $10,000, it had to repay $25,000 of long term debt, and it had to make a payment of $20,000 under a long term lease. The firm had no amortization charges. What was the EBITDA coverage ratio? a. 7.36 b. 7.69