PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 24, Problem 18PS
Convertible bonds The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2015. Each bond has the following features.
- a. What is the bond’s conversion value?
- b. Can you explain why the bond is selling above conversion value?
- c. Should Surplus call? What will happen if it does so?
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Exercise: Dirty/cleanPrice calculation
A bond has face value of $1000. The bond’s yield to maturityis 6% andthe annual coupon rate is 8% with semiannual coupon payments.The maturity of the bond is 5years. The bond was issued on 1/1/2017, and one bought on 4/1/2018.
Answer the following three questions:
a.What is the dirty price of the bond?
b.What is the accrual interest of the bond?
c.What is its clean price?
Q3)
Referring to the two corporate bonds' data at below table, answer the following:
If the market interest rate was 10%, what would the bonds prices be?
Would you consider both bonds to be selling at a discount, premium, or at par value and why?
Explain what it means when a bond is selling at a discount, a premium, or at its par value.
Bond A
Bond B
Maturity Years
20
30
Coupon Rate (Paid Semiannual)
12%
8%
Par Value (OMR)
1000
1000
From page 9-2 of the VLN, what is the first thing you want to identify when approaching a bond problem?
Group of answer choices
A. Annual bond or semiannual bond
B. Whether the market rate is different from the stated rate.
C. The cash flows provided by the bond.
D. The company's debt to equity ratio.
Chapter 24 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 24 - Bond terms Use Table 24.1 (but not the text) to...Ch. 24 - Bond terms Look at Table 24.1: a. The AMAT bond...Ch. 24 - Bond terms Select the most appropriate term from...Ch. 24 - Prob. 5PSCh. 24 - Bond terms Bond prices can fall either because of...Ch. 24 - Security and seniority a. As a senior bondholder,...Ch. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Security and seniority a. Residential mortgages...Ch. 24 - Sinking funds For each of the following sinking...
Ch. 24 - Call provisions a. Look at Table 24.1. Suppose...Ch. 24 - Covenants Alpha Corp. is prohibited from issuing...Ch. 24 - Prob. 14PSCh. 24 - Private placements Explain the three principal...Ch. 24 - Convertible bonds True or false? a. Convertible...Ch. 24 - Convertible bonds Maple Aircraft has issued a 4%...Ch. 24 - Convertible bonds The Surplus Value Company had 10...Ch. 24 - Prob. 19PSCh. 24 - Convertible bonds Iota Microsystems 10%...Ch. 24 - Convertible bonds Zenco Inc. is financed by 3...Ch. 24 - Prob. 22PSCh. 24 - Prob. 23PSCh. 24 - Bank loans, commercial paper, and medium-term...Ch. 24 - Prob. 25PSCh. 24 - Tax benefits Dorlcote Milling has outstanding a 1...Ch. 24 - Convertible bonds This question illustrates that...Ch. 24 - Prob. 28PS
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