Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 22QP
Summary Introduction
To determine: The coupon rate that the company should set on its new bond issue
Introduction:
Yields refer to the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Bond Yields [LO2] Chamberlain Co. wants to issue new 20-year bonds for some much-needed
expansion projects. The company currently has 7 percent coupon bonds on the market that sell
for $1,083, make semiannual payments, and mature in 20 years. What coupon rate should the
company set on its new bonds if it wants them to sell at par?
[EXCEL] Zero coupon bonds: Northrop Real Estate Company management is planning to fund a development project by issuing 10-year zero coupon bonds with a face value of $1,000. Assuming semiannual compounding, what will be the price of these bonds if the appropriate discount rate is 14 percent? Please use Excel
[EXCEL] Zero coupon bonds: Diane Carter is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond? Please use Excel
Chapter 7 Solutions
Fundamentals of Corporate Finance
Ch. 7.1 - What are the cash flows associated with a bond?Ch. 7.1 - What is the general expression for the value of a...Ch. 7.1 - Is it true that the only risk associated with...Ch. 7.2 - Prob. 7.2ACQCh. 7.2 - Prob. 7.2BCQCh. 7.2 - Prob. 7.2CCQCh. 7.3 - What does a bond rating say about the risk of...Ch. 7.3 - What is a junk bond?Ch. 7.4 - Prob. 7.4ACQCh. 7.4 - What do you think would be the effect of a put...
Ch. 7.5 - Why do we say bond markets may have little or no...Ch. 7.5 - Prob. 7.5BCQCh. 7.5 - What is the difference between a bonds clean price...Ch. 7.6 - What is the difference between a nominal and a...Ch. 7.6 - What is the Fisher effect?Ch. 7.7 - What is the term structure of interest rates? What...Ch. 7.7 - What is the Treasury yield curve?Ch. 7.7 - What six components make up a bonds yield?Ch. 7 - Prob. 7.1CTFCh. 7 - The 10-year bonds issued by KP Enterprises were...Ch. 7 - Prob. 7.4CTFCh. 7 - Prob. 7.6CTFCh. 7 - The term structure of interest rates is based on...Ch. 7 - Treasury Bonds [LO1] Is it true that a U.S....Ch. 7 - Interest Rate Risk [LO2] Which has greater...Ch. 7 - Treasury Pricing [LO1] With regard to bid and ask...Ch. 7 - Prob. 4CRCTCh. 7 - Call Provisions [LO1] A company is contemplating a...Ch. 7 - Coupon Rate [LO1] How does a bond issuer decide on...Ch. 7 - Prob. 7CRCTCh. 7 - Prob. 8CRCTCh. 7 - Prob. 9CRCTCh. 7 - Term Structure [LO5] What is the difference...Ch. 7 - Crossover Bonds [LO3] Looking back at the...Ch. 7 - Municipal Bonds [LO1] Why is it that municipal...Ch. 7 - Bond Market [LO1] What are the implications for...Ch. 7 - Prob. 14CRCTCh. 7 - Bonds as Equity [LO1] The 100-year bonds we...Ch. 7 - Prob. 1QPCh. 7 - Interpreting Bond Yields [LO2] Suppose you buy a 7...Ch. 7 - Prob. 3QPCh. 7 - Prob. 4QPCh. 7 - Coupon Rates [LO2] Essary Enterprises has bonds on...Ch. 7 - Bond Prices [LO2] Sqeekers Co. issued 15-year...Ch. 7 - Prob. 7QPCh. 7 - Coupon Rates [LO2] DMA Corporation has bonds on...Ch. 7 - Zero Coupon Bonds [LO2] You find a zero coupon...Ch. 7 - Valuing Bonds [LO2] Yan Yan Corp. has a 2,000 par...Ch. 7 - Valuing Bonds [LO2] Union Local School District...Ch. 7 - Calculating Real Rates of Return [LO4] If Treasury...Ch. 7 - Prob. 13QPCh. 7 - Prob. 14QPCh. 7 - Nominal versus Real Returns [LO4] Say you own an...Ch. 7 - Using Treasury Quotes [LO2] Locate the Treasury...Ch. 7 - Using Treasury Quotes [LO2] Locate the Treasury...Ch. 7 - Bond Price Movements [LO2] Bond X is a premium...Ch. 7 - Interest Rate Risk [LO2] Both Bond Sam and Bond...Ch. 7 - Interest Rate Risk [LO2] Bond J has a coupon rate...Ch. 7 - Prob. 21QPCh. 7 - Prob. 22QPCh. 7 - Accrued Interest [LO2] You purchase a bond with an...Ch. 7 - Prob. 24QPCh. 7 - Finding the Bond Maturity [LO2] Shinoda Corp. has...Ch. 7 - Prob. 26QPCh. 7 - Bond Prices versus Yields [LO2] a. What is the...Ch. 7 - Prob. 28QPCh. 7 - Zero Coupon Bonds [LO2] Suppose your company needs...Ch. 7 - Finding the Maturity [LO2] Youve just found a 10...Ch. 7 - Prob. 31QPCh. 7 - Components of Bond Returns [LO2] Bond P is a...Ch. 7 - Holding Period Yield [LO2] The YTM on a bond is...Ch. 7 - Valuing Bonds [LO2] Jallouk Corporation has two...Ch. 7 - Valuing the Call Feature [LO2] At one point,...Ch. 7 - Prob. 36QPCh. 7 - Real Cash Flows [LO4] When Marilyn Monroe died,...Ch. 7 - Prob. 38QPCh. 7 - Financing SS Airs Expansion Plans with a Bond...Ch. 7 - Financing SS Airs Expansion Plans with a Bond...Ch. 7 - Financing SS Airs Expansion Plans with a Bond...Ch. 7 - Financing SS Airs Expansion Plans with a Bond...Ch. 7 - Financing SS Airs Expansion Plans with a Bond...Ch. 7 - Financing SS Airs Expansion Plans with a Bond...Ch. 7 - Prob. 7MCh. 7 - Prob. 8MCh. 7 - Financing SS Airs Expansion Plans with a Bond...Ch. 7 - Prob. 10M
Knowledge Booster
Similar questions
- Copdog Airbutus co. wants to issue new 20-year bonds for some much needed expansion projects. the company currently has 8% coupon bonds on the market that sell for $930, make semiannual payments , and mature in 20 years. what coupon rate should the company set on its new bonds if it wants them to sell at par?arrow_forwardText Problem 22 (p.241) Bond Yields: Uliana Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 6% coupon bonds on the market with a par value of $1,000 that sell for $967, make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? .arrow_forward[EXCEL] Yield to maturity: Rudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds have a coupon rate of 6 percent and make semiannual coupon payments. What is the current market yield on this bond? Please use Excelarrow_forward
- Airbutus Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 8% coupon bonds on the market that sell for $930, make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? How can I solve it with financial calculator method?arrow_forwardces Suppose your company needs to raise $69 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 4.2 percent, and you're evaluating two issue alternatives: a semiannual coupon bond with a coupon rate of 4.2 percent and a zero coupon bond. The tax rate is 25 percent. Both bonds will have a par value of $2,000. a-1. How many of the coupon bonds would you need to issue to raise the $69 million? a-2. How many of the zeroes would you need to issue? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. In 30 years, what will your company's repayment be if you issue the coupon bonds? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number e.g., 1,234,567.) b-2. What if you issue the zeroes? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)…arrow_forwardChamberlain Company wants to issue new 17-year bonds for some much-needed expansion projects. The company currently has 10.2 percent coupon bonds on the market that sell for $883.72, make semiannual payments, and mature in 17 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000. Multiple Choice 12.10% O 11.70% O 11.50% O 5.90% O 11.80%arrow_forward
- A4 3 You bought one of BB Co.’s 10% coupon bonds one year ago for $1100. These bonds make annual payments, have a face value of $1000 each, and mature seven years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 8%. If the inflation rate was 3% over the past year, what would be your total real return on investment according to the Exact Fisher Formula?arrow_forward[EXCEL] Bond price: Regatta Inc. has seven-year bonds outstanding that pay a 12 percent coupon rate. Investors buying these bonds today can expect to earn a yield to maturity of 8.875 percent. What is the current value of these bonds? Assume annual coupon payments. Please use Excelarrow_forwardAirbutusCo. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 8% coupon bonds on the market that sell for $930, make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? pls solve with a formula and not excel formula. show workingsarrow_forward
- [EXCEL] Realized yield: Four years ago, Lisa Stills bought six-year, 5.5 percent coupon bonds issued by the Fairways Corp. for $947.68. If she sells these bonds at the current price of $894.52, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. Please use Excelarrow_forwardces Suppose your company needs to raise $40.3 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 5.3 percent, and you're evaluating two issue alternatives: a semiannual coupon bond with a coupon rate of 5.3 percent and a zero coupon bond. The tax rate is 23 percent. Both bonds will have a par value of $1,000. a. How many of the coupon bonds would you need to issue to raise the $40.3 million? How many of the zeroes would you need to issue? Note: Do not round Intermediate calculations. Round your coupon bond answer to the nearest whole number, e.g., 32 and your zero coupon bond answer to 2 decimals, e.g., 32.16. b. In 30 years, what will your company's repayment be if you issue the coupon bonds? What if you issue the zeroes? Note: Do not round Intermediate calculations and enter your answers in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567. c. Assume that the IRS amortization rules apply for…arrow_forwardA company wants to issue new 10-year bonds for some much-needed expansion projects. The company currently has 11 percent bonds on the market that sell for $1,130.08, make semiannual payments, and mature in 10 years. What should the coupon rate on the new bonds if the company wants to sell them at par?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education