M Inc. issued 2,000 convertible bonds in 2009 at a coupol nd a par value of £1,000. Each bond is convertible into M's ock at £25 per share. M expected the stock price to rise ra e convertible was issued and lead to a quick conversion o ebt into equity. However, a recessionary climate has preve om happening, and the bonds are still outstanding. In 2010 come of £3 million. One million share of its stock were out e entire year, and its marginal tax rate is 40%.
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- In December 2010, LoloLimon issued $100 million in bonds. These bonds originally had a 25 year maturity, a 8.5% coupon rate, and semi-annual interest payments on a $1,000 Par value. When they originated, the bonds sold at par. Since origination, the required rate of return on LoloLimon bonds has hovered between a low of 7.25% to a high of 12.5% and currently sell at $45 above par value. What is the current cost of debt (rd) for LoloLimon?In December 2002, DoubleDown, Inc. issued $100 million in bonds. These bonds originally had a 20 year maturity, a 9.5% coupon rate, and semi-annual interest payments on a $1,000 Par value. When they originated, the bonds sold at par. Since origination, the required rate of return on DoubleDown bonds has hovered between a low of 6.75% to a high of 11.5% and currently sell at par value. What is the current cost of debt (r,)for DoubleDown?Suppose that on March 3, 2017, ACME Inc. issued 10-year coupon bonds with a face value of $100,000 and coupon payments of 5,000. (the coupons are paid each year on March 3, starting with the year 2018). Suppose that on March 3, 2017, ACME bonds sold for $90,000. 2. What can you say about the value of the the yield to maturity paid by ACME bonds, without calculating it?
- James Cobin Co is a software development company that headquarters in Toronto and covers Canada, the United States, Japan, and Europe. The firm has issued bonds at face value at a yield to maturity at 6% a few years ago. Now with 10 years left until maturity, the yield to maturity has increased to 8%. a. Explain and interpret the change in the yield to maturity. b. What is the current price of the bond? Assume coupons are paid once a year. C Suppose that you purchased this bond today and are considenng selling it a year later. The yield to maturity is expected to be 10% a year later. Isit a good investment? Explain.KJJ Ltd has recently issued bonds paying a fixed annual coupon of 10% p.a. and maturing in10 years’ time. The yield to maturity on these bonds is 8% p.a. If market interest rates fallsunexpectedly, what is most likely to happen to the price of the bonds? A. The bonds will now trade at par.B. The bonds will now trade at a premium. C. The bonds will now trade at a discount.D. One cannot say anything about the price of the bonds without additional information.A major manufacturer is reevaluating its bonds since it is planning to issue a new bond in the current market. The firm's outstanding bond issue has 7 years remaining till maturity. The bonds were issued with an 8 per cent coupon rate (paid quarterly) and a par value of $1,000. The required rate of return is 10 per cent. What is the current value of these securities?
- Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 7.4%. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 12%. What is the price of the bond now? (Assume semiannual coupon payments.)Doha plc has some surplus funds that it wishes to invest in bonds. The company requires a return of 15% on bonds, and the finance director has asked you to analyse whether it should invest in either of the following bonds that are available:Company A: Expected profit 12% bonds, redeemable at par at the end of two more years, with a current market value of QAR 95 per QAR 100 bondCompany B: Expected profit 8% bonds, redeemable at QAR110 at the end of two more years, with a current market value of QAR 95 per QAR 100 bonda. Calculate the expected value (price) of the two bonds and evaluate if either offer an appropriate return for Doha Plc.b. Critically evaluate what would be the impact on the price of bonds if Doha Plc reduces their required return.c. Critically evaluate and discuss the factors that should be considered by the directors of a company when choosing whether to use debt or equity finance for a new projectd. Recently one director has attended a finance conference, on their…XYZ Inc. is a company that is considering issuing bonds to finance the expansion of its activities. The managers thought about bonds with 10 or 15 years to maturity, with a coupon rate of 6%, paid semiannually. The face value of those bonds would be $1,000 and theywould expect those bonds to pay just as much as investors require, being sold at par at the issuance date. Suppose that an investor is interested in the company’s bonds, and they expect that the interest rates (YTM) are going to change immediately, decreasing by 2 percentage points compared to the YTM at issue. Which maturity bond would be better for this investor, the 10 or 15-year? What would be the dollar gain per bond with the expected immediate YTM change in each case?
- Access Ltd is financing a new investment and was previously unsuccessful to secure a similar interest rate as they had with their previous debt from their local Bank. Given their AAA credit rating, they instead decided to issue 5000 units of a 10-year bond to fund the investment. Coupon rate is set at 8% per annum and will be paid quarterly. The face value of one of the bonds is $1,000. The estimated yield for similar bonds of comparable risk rating is 12% per annum. Determine the market price of the one of the bonds.1. (a) On 1 July 2015, an investor buys a corporate bond issued by Krazy Building plc. The bond is repayable at par on 1 July 2035 and has a coupon rate of 6% payable twice yearly in arrears. Calculate the purchase price per £100 nominal if the gross redemption yield is 10.0% pa. (b) Krazy Building has some financial problems and it looks as if the company may not be able to make all repayments on the bond. The price of the bond falls, and on 1 July 2017 the gross redemption yield on the bond is 15.0% pa. On the same day, Big Bank makes an offer to buy the company if bond holders accept an immediate payment of £54 per £100 nominal. Explain why the investor might accept this offer. (Hint: You will need to calculate the market value of the bond on 1 July 2017).On December 15, 2010 ABC Company issued a 50 Million bond with a par value of Sh. 1000. The bond matures on December 15, 2017. The bond has a coupon rate of 9% payable annually and the market interest rate is 9%.Using the Edate function in excel, what is the price of this bond? a. What would be the price of this bond if the market interest rate is 10% b. If the market interest rates are 0, 1,2,3,4,5,6,7,8,9.10,11,12.13,14 (all percentages). Prepare a schedule showing the market prices of this bond at each interest rate c. If the bond is sold on April 3, 2011 and the seller quotes the price at 1050. Calculate the clean and the dirty price of the bond and the yield to maturity