Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 9.00% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Answer Format: Currency: Round to: 4 decimal places.

Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 9.00% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Answer Format: Currency: Round to: 4 decimal places.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Henderson's credit rating is BBB, and its outstanding 8% coupon bond have 15 years remaining until maturity. What is a fair price for these bonds if the credit spread for BBB bonds over Treasuries is 5.9%, and the yield on comparable Treasuries is 2.8% ? Use a par value of $1,000 and assume semi-annual coupon payments. Enter your answer as a positive number rounded to the nearest penny. Type your answer.
A construction firm released a 6% coupon rate bond in 2018 with a face value of £ 1000 and a maturity of 10 years. The bonds have a yield to maturity of 7%. Coupons are paid annually. Imagine that we are now at the end of year 2 and there are just 8 years left. (a) What was the price of these bonds when they were launched in 2018? (b) What is the price of these bonds today? (c) Based upon today's price, what are the nominal and current yields of these bonds? (d) Assuming that the firm has a debt to equity ratio of 2: 9, and that the cost of equity is 8%, what is the firms weighted average cost of capital?
Your company wants to raise $8.5 million by issuing 10-year zero-coupon bonds. If the yield to maturity on the bonds will be 5% (annual compounded KAPR), what total face value amount of bonds must you issue? ve this 6 F V The total face value amount of bonds that you must issue is $. (Round to the nearest cent.) View an example Get more help. G B.B % 5 T G 1 B A 6 Y H ☐ MacBook Pro N & 7 U J * 8 M Ⓒ K ( 9 H 15 X 1 option Clear all + = Check answer delete retur
Your company wants to raise $8.0 million by issuing 30-year zero-coupon bonds. If the yield to maturity on the bonds will be 5% (annual compounded APR), what total face value amount of bonds must you issue?
1. What is the yield to maturity on a simple loan for $3 million that requires a repayment of $6 million in three years? 2. What is the yield to maturity of a bond you buy for $900? You are promised to be paid $10 yearly coupon payments forever. The inflation rate is 6% in the economy. 3. What was the rate of return of a $1500 face value coupon bond that had a 6% coupon rate, bought for $1200 and sold for $1100 the next year?
A corporation is planning to sell its 90 - day commercial paper to investors offering a 10.2 percent yield. If the liquidity premium is estimated to be 0.2 percent, and there is a 0.4 percent tax adjustment. Also, the three month real annualized rate is 5.6 percent and expected inflation is 1.1 percent. What is the appropriate default premium?
Builtrite needs to raise $2,000,000 for a plant improvement. It plans to sell $1000 par value bonds with a 10% coupon rate arde a 15 year maturity. Investors require a 9% rate of return. Calculate the market value of the bonds, what is the net price of the bonds if flotation costs are 5% of the market price?
The required rate on this company's debt has now risen to 16 percent. The firm has a bond issue outstanding with 24 years to maturity and a coupon rate of 9.8 percent, with interest being paid semiannually. What is the current yield?
KroBank issues a zero coupon bond and it has to pay the face value of the bond of $100 M due in exactly five years. Assuming interest rates are currently at 8% p.a., which of the following is the best investment option for the bank to ensure it has enough funds to meet the liability in five years: Invest $100M today in coupon-paying bonds paying 8% p.a. annual coupons with maturity of 7 years (duration is 5.62 years), sell the bonds in year 5. Invest $100M today in coupon-paying bonds paying 8% p.a. annual coupons with maturity of 6 years (duration is 4.99 years), sell the bonds in year 5. Invest $100 M today in coupon-paying bonds paying 8% p.a. annual coupons with maturity of 5 years (duration is 4.31 years). Invest $100 M today in coupon-paying bonds paying 8% p.a. annual coupons with maturity of 8 years (duration is 6.21 years), sell the bonds in year 5.
Third Mortgage Investors makes money by purchasing mortgage backed securities (MBS), stripping them into interest only (IO) and principal only (PO) components, and selling the components for more than it paid for the original security. Suppose the company purchases a $100,000 Face value MBS carrying a coupon of 9 percent and a maturity of 30 years. Assume for the purpose of the following analysis, the MBS will make payments on an “ANNUAL BASIS.” What is the remaining principal balance on the MBS if it survives 1-year? 3-years? 5 years? 8 years?
Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 8.75% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Submit Answer format: Currency: Round to: 4 decimal places.
A twenty-year government bond with a face value of 120$ makes annual coupon payments of 1% and offers a yield of 8% annually compounded.Suppose that one year later the bond yields at 5%. Showing your calculations,a) What return has bondholders earned over the 12-month period? Instead, suppose now that one year later the bond yields at 5.5%.b) What return has bondholders earned over the 12-month period?

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