1. Stiles Corporation issues a new series of bonds on January 1‚ 1982. The bonds were sold at part ($1000)‚ had a 12% coupon‚ and matured in 30 years‚ on December 31‚ 2011. Coupon payments are made semiannually (on June 30 and December 31). a) What was the YTM on January 1‚ 1982? - Explain b) What was the price of the bonds on January 1‚ 1987‚ 5 years later‚ assuming that interest rates had fallen to 10%? (Show in equation form‚ plug all the relevant numbers and without calculation‚ say whether
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STARTING WITH COUPON BONDS • Three aspects: In May 2010 the U.S. Treasury sold a bond with – a coupon rate of 2 % and – a maturity date of May 31‚ 2015 – a payment frequency of two a year‚ six months apart s of May 31‚ 2015” • This bond is called “ Coupon rate 9/5/2013 Coupon frequency‚ “s” is for “semi‐annual” L. Wu maturity 2 Cash Flow of the Bond • The unit for bond purchasing is $1‚000. • Suppose that an investor purchases $1m face value of the bond‚ i.e.‚ 1‚000 units
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following: a. A bond that has a $1‚000 par value and a contract or coupon interest rate of 11.3%. The bonds have a current market value of $1‚128 and will mature in 10 years. The firm’s marginal tax rate is 34%. b. A new common stock issue that paid a $1.81 dividend last year. The firm’s dividends are expected to continue to grow at 7.2% per year forever. The price of the firm’s common stock is now $27.28 c. A preferred stock paying a 8.5% dividend on a $138 par value. d. A bond selling to yield
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1. (Bond valuation) Michael Motors’ bonds have 10 years remaining to maturity. Interest is paid annually‚ the bonds have a $1000 par value and the coupon interest rate is 8 percent. The bonds have a yield to maturity of 9 percent. What is the current market price of these bonds? Cash flow = 8% of 1‚000 = 80 YTM or interest rate n = 10 i = 9(%) PMT = 80 FV = 1000 PV = solve PV=935.82 2. (Valuation a preferred stock) Susie’s Pet Supplies issued preferred stock with a state dividend of
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securities‚ mostly in the form of bonds. These markets are important source of funds‚ especially in a developing economy like India. India debt market is one of the largest in Asia. Like all other countries‚ debt market in India is also considered a useful substitute to banking channels for finance. The most distinguishing feature of the debt instruments of Indian debt market is that the return is fixed. This means‚ returns are almost risk-free. This fixed return on the bond is often termed as the ’coupon
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dollar? Think of the kind of business they are in. * currency match or mismatch? Should they be issuing the debt if they go to the debt bond? In US dollar denomination? Or some other denominations? * issue in domestic‚ foreign‚ or Euromarkets? Foreign bond market : a market place other than Eurobond market. Foreign bond market is regulated market Euro bond market( in Macau/ Bahamas …) is an unregulated market. • Tax-saving • Issuing costs are less • Anonymity – no one knows who owns this
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9: Woodside Petroleum Limited is about to raise additional short-term funding to meet its funding needs over the next three-month planning period. It is considering issuing commercial bills or promissory notes. (a) What is a promissory note? Identify and briefly explain the roles of the parties to a P-note issue. (b) What are the main differences between P-notes and commercial bills of exchange? A promissory note‚ which typically has a maturity of 90 days‚ is described as ‘an unconditional promise
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Week 4 Homework Solutions: Problem Set 4 1. Determining Profit or Loss from an Investment. Three years ago‚ you purchased 150 shares of IBM stock for $88 a share. Today‚ you sold your IBM stock for $103 a share. For this problem‚ ignore commissions that would be charged to buy and sell your IBM shares. a. What is the amount of profit you earned on each share of IBM stock? The profit on each share of IBM stock was $15. $103 priced when each share was sold‚ $88 priced when each
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into capital the company shall be exempted from its debts and also‚ given the increase of its capital‚ be reinforced in the markets. There are three main methods of converting liabilities/debt to capital4. Firstly the conversion of convertible bonds‚ which the company has
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these long term liabilities consist of bonds‚ mortgages‚ capital leases‚ as well as other types of debt. Bonds are one type of long-term liability‚ which are traditionally valued at the present value of the bonds expected future cash flows‚ which are made up of both interest and principal. Bonds can be issued at face value‚ which is typically referred to as par in the investment community‚ or they are issued at a discount or premium. In the event bonds are issued at par‚ the company records
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