EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 6, Problem 25P
Summary Introduction
To discuss: The reason why firm would issue this kind of bonds.
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6. Below is a list of daily Treasury note and bond listings from Wall Street Journal. Treasury
bonds make semiannual payments. First column is the maturity date. Second column is the
coupon rate. Third and Fourth columns show the bid and ask prices. Treasury prices are
quoted as a percentage of face value. So on the 2025/10/31 bond, the bid price is shown to be
106.212. With $1000 face value, this quote represents $1062.12. The Fifth column shows the
change in the ask price from the previous day, measured as percentage of face value. So the
2025/10/31 bond's ask price decreased by 0.002%, or $0.02 with face value of $1000, from
previous day's value. The last column shows the yield to maturity, based on the ask price.
Locate the Treasury bond in Figure 7.5 maturing in November 2026. Is this a premium or a
discount bond? What is its current yield? What is its yield to maturity? What is the bid-ask
spread in dollars? Assume a par value of $10,000.
Maturity
10/31/2025
11/15/2026
Coupon…
Uber Technologies Inc. issued $2 billion of bonds in October 2018. The total bond issuance included $500 million of five-year bonds with a 7.5% coupon and $1.5 billion of eight-year bonds with an 8% coupon. How would Uber’s financial statements be impacted by its $2 billion bond issuance? Would you have bought the bonds if you could? Why or why not?
You find the following corporate bond quotes. The bond was issued on January 15, 2022. The bonds have a par value of $2,000 and semiannual coupons.
Company (Ticker)
Coupon
Maturity
Price
Yield to Maturity
Estimated $ Volume (000s)
Xenon, Incorporated (XIC)
6.900
January 15, 2042
94.363
??
57,377
Kenny Corporation (KCC)
7.270
January 15, 2036
??
6.32
48,956
Williams Company (WICO)
??
January 15, 2038
94.885
7.14
43,817
What would be the price for the Kenny Corporation bond?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
What is the current yield of the Kenny Corporation bond?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Chapter 6 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 6 - Prob. 1QTDCh. 6 - Prob. 2QTDCh. 6 - Prob. 3QTDCh. 6 - Prob. 4QTDCh. 6 - Prob. 5QTDCh. 6 - Prob. 6QTDCh. 6 - Prob. 7QTDCh. 6 - Prob. 8QTDCh. 6 - Prob. 9QTDCh. 6 - Prob. 11QTD
Ch. 6 - Prob. 12QTDCh. 6 - Prob. 13QTDCh. 6 - Prob. 14QTDCh. 6 - Prob. 15QTDCh. 6 - Prob. 16QTDCh. 6 - Prob. 17QTDCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27P
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- The following table lists several corporate bonds. Treat these as zero coupon bonds, as in Example 2. Company AT&T Bank of America General Electric Goldman Sachs Verizon Wells Fargo Time to Maturity (years) 10 10 2 3 8 7 Annual Compound Interest Rate (%) 3.97 4.42 6.12 5.81 4.41 3.18 If you bought AT&T bonds with a maturity value of $14,000, how much did you originally pay? (Round your answer to the nearest $1.) $arrow_forwardWould Bank of America or Verizon pay the most total interest on a $5,000 bond at maturity? How much interest would that be? Bank of America would pay $ in interest on a $5,000 bond at maturity. Verizon would pay $ in interest on a $5,000 bond at maturity. So, we see Verizon would pay the most interest on $5,000 bond at maturity.arrow_forwarda. What is the price (expressed as a percentage of the face value) of a 1-year, zero-coupon corporate bond with a AAA rating and a face value of $1,000? b. What is the credit spread on AAA-rated corporate bonds? c. What is the credit spread on B-rated corporate bonds? d. How does the credit spread change with the bond rating? Why? Note: Assume annual compounding.arrow_forward
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