Essay about Case Study

The yield to maturity on a 15-year bond is a true estimate of the cost of 30-year bond

* b.Assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 50 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm’s straight bonds yield 12%. Assume that each warrant will have a market value of $3 when the stock sells at $20. What coupon interest rate, and dollar coupon, must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.)

The Yield to Maturity (YTM) of a bond is:   Interest rate that makes the present value of the bond’s

Complete problem 31 of Chapter 10 (shown below), and submit to your instructor. Show your calculations and the algebraic manipulation of the price equation for the bond. In addition to solving the problem, write a 100 to 200 word essay on the term structure of fixed income securities.

Watters Umbrella Corp. issued 20-year bonds 2 years ago at a coupon rate of 8.4 percent. The bonds make semiannual payments. If these bonds currently sell for 90 percent of par value, what is the YTM? (Do not round intermediate calculations and enter your answer as a percent rounded to 2

a) What is the price for Bond B (2 pts)? What is the current yield for Bond B (2 pts)? Bond A is selling at a ________(discount /par/ premium) (2 pts).

If Target issues 9% coupon bonds on 1/1/18 for $12,775,000 due 12/31/22 with semiannual interest payments on July 1st and December 31st, the company would receive $15,011,152 on the date of issuance (1/1/18). The present value of $15,011,152 was calculated using payments of $574,875 every 6 months, compounding for 10 periods, at the rate of 2.5% per period.

A bond with an annual coupon of $70 and originally sold at par for $1,000. The current market interest rate (yield to maturity) is 8%. This bond will sell at _______. Assuming no change in market interest rates, the bond will present the holder with capital ________ as it matures.

(b) The bonds are sold on August 1, 2011 for $425,000 plus accrued interest. Prepare all entries required to properly record the

1(a) Regular Treasury bonds are purchased at face value in the beginning or an adjusted price prior maturity. And in every period, normally annul or semiannual, investor will receive a coupon as an interest and at the maturity a principal plus coupon.

2. The discount rate for this bond would be 0.70%. I started with an appropriate discount rate to derive my bond purchase price, since I would not purchase a bond without finding out ahead of time what a good price should be.

b. Generate a graph or table showing how the bond’s present value changes for semi-annually compounded interest rates between 1% and 15%.

If the company benefits from the provision of the bond, then the coupon rate will be higher. If the bondholder’s benefit, then the bond will have lower coupon rate.

4. Consider a bond issued at par. The annual coupon is 8 percent and frequency of coupon is semiannual. How would the YTM of this bond be reported in most of the European markets?

1. On March 15, a 20-year, $5,000 par value bonds with annual interest of 9 percent was issued. Three thousand of these bonds were issued at a price of 98. Interest is paid semi-annually.