Find out cash flow and irr-cost of bond is irr of cash flows

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Reference no: EM131814691

1. A $ 1000 par value bond issued by Conseco Electronics has 5 years to Maturity. The bond pays $34 per year in interest and is selling for $920 . What is the Yield to maturity?

Hints : YTM is the IRR of cash flows.

2. What is the cost of 4% Bond of $1000 issued by XYZ corporation ? The company’s effective tax rate is 25%. Debentures to be redeemed after 5 years.

Hints: Cost of Bond = Interest x ( 1- Tax Rate)

3. What is the cost of 4% Bond of $1000 issued by XYZ corporation ? The company’s effective tax rate is 25%. Debentures to be redeemed after 5 years. Issue expense 0.5%

Hints: Find out cash flows and IRR. Cost of bond is IRR of cash flows.

The company gets $ 995 per bond and pay interest after tax saving $ 30 per year.

Reference no: EM131814691

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