What is your six-month return on the bond

Assignment Help Financial Management
Reference no: EM132032577

1. Danny’s Karate Dojo has a commited line of credit with a maximum of $350,000 and interest rate of 6% (EAR). The loan has a commitment fee of 0.5% (EAR). If the firm borrows $300,000 at the start of the year and repays it at the end of the year, what is the total cost of the loan?

2. You purchase a $1,000 par-value bond with a 6% coupon rate, semiannual coupons and one year to maturity. The bond’s price was $1003.84 when you bought it. Six months later, you receive the coupon payment and then immediately sell the bond. The bond’s YTM upon sale was 6.2% (expressed as an APR with semiannual compounding).

(a) What was the price of the bond when you sold it?

(b) What is your 6-month return on the bond?

Reference no: EM132032577

Questions Cloud

Correlation coefficient of yahoo and google : The correlation coefficient of Yahoo and Google is -1. What should be the risk free rate if there is no arbitrage opportunity?
Risk of material misstatement for revenue and receivables : How would you rate the risk of material misstatement for revenue and receivables? Explain.
Compute the weighted average cost of capital : Compute the weighted average cost of capital. Which project(s) should be accepted? New machine.
Debt to the company and replacing the management : How much would you gain from acquiring 50% of ABC's shares by borrowing, attaching the debt to the company and replacing the management?
What is your six-month return on the bond : What was the price of the bond when you sold it? What is your 6-month return on the bond?
Does this bond have original issue discount : Does this bond have original issue discount? What is the bond’s issue price?
What is tristan bond worth today : Similar bonds are being issued that pay 4%. What is Tristan’s bond worth today?
What is payback period of this investment : What is the payback period of this investment? The firm should not have been accepted should be accepted the project.
The plant was paid for by the bond plus retained earnings : Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings.

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate the present value of an annuity

Calculate the present value of an annuity that makes annual payments of $1,000,000 every year for 9 years, with the next payment being made exactly one year from now.

  What is the component cost of debt

Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 40%, wha..

  What is the current beta on common stock

Quantitative Problem: Currently, Meyers Manufacturing Enterprises (MME) has a capital structure consisting of 35% debt and 65% equity.  What is the current beta on MME's common stock? What would be the company's new WACC if it adopted the proposed ch..

  Is it correct that justin will be taxed like an individual

Justin believes the management of an S corporation is structured just like that of a corporation. Is he correct? Why or why not?

  What does payback period calculation mean

What is the payback period for the Timco investment outlined in #4? What does the payback period calculation mean?

  What is the option market price

What is the option’s market price? What is the price of RWJ’s stock?

  Determine maximum deviation allowable in cost of capital

determine the maximum deviation allowable in the cost of capital estimate that leaves the investment decision unchanged.

  What effect will this transaction have on the equity of firm

The balance sheet for Throwing Copper, Inc., is shown here in market value terms. There are 28,000 shares of stock outstanding. Market Value Balance Sheet Cash $ 111,000 Fixed assets 524,600 Equity $ 635,600 Total $ 635,600 Total $ 635,600 The compay..

  What is the comprehensive income

What is the comprehensive income?

  Which gives it a yield to maturity

A bond currently sells for $1,000, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 20 basis points, the price of the bond falls to $975. What is the duration of this bond?

  Which policy would be most costly for the australian nation

Which of the following policies would be most costly for the Australian nation as a whole, and which would be least costly?

  Bank account to cover college expenses

Beginning three months from now, you want to be able to withdraw $1,000 each quarter three from your bank account to cover college expenses over the next 4 year

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd