What amount will the company raise to fund the project

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Question - Woodside Petroleum Limited has issued $100 million of debentures, with a fixed-interest coupon equal to current interest rates of 7.70 per cent per annum, coupons paid half-yearly and a maturity of 10 years.

a. What amount will Woodside raise on the initial issue of the debentures?

b. After three years, yields on identical types of securities have risen to 8.75 per cent per annum. The existing debentures now have exactly seven years to maturity. What is the value, or price, of the existing debentures in the secondary market?

c. Discuss why the value of the debenture has changed; that is, explain the bond price/yield relationship using the above example.

A company issues a bank-accepted bill to fund a short-term business project. The bill is issued for 180 days, with a face value of $1 500 000 and a yield of 9.87 per cent per annum. What amount will the company raise to fund the project?

Reference no: EM132855127

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