What price would the company bonds sell for in market

Assignment Help Financial Management

Reference no: EM131919884

Kramerica, Inc. wants to finance its acquisition of Vandalay Industries, Inc. with debt, so the company issues bonds with the face value of $1,000 each, which will mature in 12 years and pay 7% interest coupon. Answer the questions below based on this information.

What price would the company’s bonds sell for in the market given that the similar bonds have 9% yield to maturity?

What price would the company’s bonds sell for if the coupon payments were to be made semiannually and what would be their effective annual yield given that the similar bonds have 9% yield to maturity?

What price would the company’s bonds sell for after two years if the market interest rates drop to 5% provided that the bond coupons are paid semiannually?

Suppose that Mr. Kramer has a choice whether to invest his money in Kramerica’s bonds or New York City municipal bonds of comparable risk and rating, which are non-taxable and yield 4.9% annual rate. If he was in 35% tax bracket, then which investment would be more attractive for him and what would be the tax rate that would make him indifferent between these two?

Extra Credit Section.

Suppose that Mr. Kramer’s broker quotes him the price of $814 for a thirty-year bond with the face value of $1,000 that pays 13% annual coupon rate. Based on this information, what is this bond’s YTM and the current yield?

Reference no: EM131919884

Questions Cloud

Discuss the fear of the explorers in the travel narratives : Discuss the fear of the explorers in the travel narratives of our period. What does their fear tell us about their attitude to the New World?

Describe and analyse its relationship with governments : GSB013 Economics For Managers - Estimate its contribution to Australian GDP. What proportion of Australia's GDP does that represent

What does the evidence tell us : Evaluate the evidence. Create a draft of the findings of the articles you have selected and how they contribute to our knowledge of this problem.

Conduct a search for transactional leader : Conduct a search for transactional leader of Liberty University's Online Library resources to find 3 peer-reviewed articles.

What price would the company bonds sell for in market : What price would the company’s bonds sell for in the market given that the similar bonds have 9% yield to maturity?

Determine the best implementation approach-agile : Establish who will provide the business requirements. What approach will be used to solicit the requirements from the subject matter experts?

Explain the logical fallacies for each given scenario : Explain the logical fallacies, some may only have one, for each scenario. Expalin what has gone wrong in the fallacies. Be specific in your reasoning.

In what ways has advertising affected american culture : In what ways has advertising affected American culture? What are the key persuasive techniques used in consumer advertising?

Examine role of assimilation in defining eric lius identity : Read "Note of a native speaker". Examine the role of assimilation in defining Eric Liu's identity. Write 4-5 pages paper with a given thesis statement.

User Account

All Pages