PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 24, Problem 25PS
Summary Introduction
To determine: The factors that consider for analysing these alternatives and the circumstances would prefer each of these possible loans.
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1) To reactivate the economy, banks offer loans that meet their annual compound interest rates,
but with different capitalization periods.
Bank A: interest rate of 14.8% per month
Bank B: interest rate 15.1% per year
Bank C: interest rate 14.55% semi-annual
Bank D: interest rate 3.8% quarterly
Which banks have an equivalent interest rate when approximating their result?
2) What is the compound interest rate that is equivalent to 15% simple interest, both with annual
capitalization in 6 years?
3)What is the annual compound interest rate that is equivalent to 12.5% annual compound
interest with quarterly capitalization?
To make Auto loan look more attractive than they really are, some banks advertise that their rates are higher than their competitor’s rates; however, the some automotive companies says that their rate is a simple interest rate. If a person deposits Php 80 000 at 12 % per year simple interest, what compound interest rate would yield the same amount of money in 3 years?
a. 8.03 % per year
b. 10.79 % per year
c. 7.71 % per year
d. 9.13 % per year
Which loan strategy would achieve some flexibility; no exposure to credit risk but exposure to repricing risk?
Question 22 options:
A company borrows $1 million for one year at a fixed rate, then renew the credit annually
A company borrows $5 million for five years at a fixed interest rate
A company borrows $5 million for five years at a floating rate, LIBOR + 1%
A company borrows $1 million for one year at LIBOR + 1%, then renew the credit annually
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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