Reference no: EM13932723
Six years ago the Singleton Company issued 16-year bonds with a 14% annual coupon rate at their $1,000 par value. The bonds had a 9% call premium, with 5 years of call protection. Today Singleton called the bonds.
Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. Round your answer to two decimal places.
%
Explain why the investor should or should not be happy that Singleton called them.
A) Since the bonds have been called, interest rates must have risen sufficiently such that the YTC is greater than the YTM. If investors wish to reinvest their interest receipts, they can now do so at higher interest rates.
B) Since the bonds have been called, interest rates must have risen sufficiently such that the YTC is greater than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates.
C) Since the bonds have been called, investors will receive a call premium and can declare a capital gain on their tax returns.
D) Since the bonds have been called, investors will no longer need to consider reinvestment rate risk.
E) Since the bonds have been called, interest rates must have fallen sufficiently such that the YTC is less than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates.
|
Negative real yield did they mean-nominal interest rate
: Writing in the Wall Street Journal, two economists made the following prediction: "We believe that when investors awake from their depressed state, they will realize that they do not have to lend the U.S government money for the 10 years at a negativ..
|
|
Calculate the joint-venture annual cash flows
: American Apparel Inc. - Saved from Bankruptcy but can it sustain? 1. Set up the Net Income Statement for the joint venture. 2. Calculate the Joint-Venture's annual cash flows from the project.
|
|
Assuming hillside uses gaap determine the book value
: Assuming Hillside uses GAAP determine the book value and the amount of any gain or loss recognized on the 2013 and 2014 financial statements.
|
|
What is the yield to maturity at current market price
: Heymann Company bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%. What is the yield to maturity at a current market price of $834?
|
|
Compute realized rate of return for investor purchased bonds
: Six years ago the Singleton Company issued 16-year bonds with a 14% annual coupon rate at their $1,000 par value. The bonds had a 9% call premium, with 5 years of call protection. Today Singleton called the bonds. Compute the realized rate of return ..
|
|
Compute the cost of goods sold and ending inventory
: Use a vertical model to show the 2013 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average.
|
|
What is the projects terminal cash flow
: PDF Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. The new lathe is expected to be sold for $5,000 at the end of the project's ten-y..
|
|
Understanding management accounting practices
: For this assignment you will need to read the following article: Scapens, R.W. (2006) 'Understanding management accounting practices: a personal journey',
|
|
What does the article mean by comparable treasury
: In 2012, Anheuser-Busch In Bev NY, maker of Budweiser and other beer, sold debt of varying maturities. According to an article in the Wall Street Journal: "The three-year notes priced with a risk premium of 0.5 percentage point over comparable Treasu..
|