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(Bond valuation). Pybus, Inc. is considering issuing bonds that will mature in 19 years with an annual coupon rate of 7%. Their par value will be $1000, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 12%. However, Pybus is not sure whether the new bonds will receive a double a AA rating. If they receive an A rating, the yield to maturity on a similar A bonds is 13%. What will be the price of these bonds if they receive either an A or a AA rating?
a. The price of the Pybus bonds if they receive a AA rating will be $_____.
b. The price of the Pybus bonds if they received an A rating will be $_____.
A company has derivatives transactions with Banks A, B, and C that are worth +$20 million, -$15 million, and -$25 million, respectively, to the company. The transactions are cleared bilaterally and are subject to one-way collateral agreements where t..
Now locate a company that has reduced or eliminated its common stock cash dividend over the past year. Why did the company reduce or eliminate its dividend? What has happened to the company’s stock price over the year?
All else being equal, an increase in the yield to maturity of a bond will result in:
Consider the following year 0 statement for Blaircorn: Sales growth 10% Current assets/Sales 15% Current liabilities/Sales 8% Net fixed assets/Sales 77% Costs of goods sold/Sales 50% Depreciation rate 10% Interest rate on LT debt 10.00% Interest paid..
What was the rate of return on this investment?
The Yo-Yo Corporation tries to determine the appropriate cost for retained earnings to be used in capital budgeting analysis. The firm’s beta is 1.98. The rate on six-month T-bills is 2.04%, and the return on the S&P 500 index is 8.82%. What is the a..
Thornley Machines is considering a 3-year project with an initial cost of $900,000. The project will not directly produce any sales but will reduce operating costs by $445,000 a year. The equipment is depreciated straight-line to a zero book value ov..
Wear Ever is expanding and needs $10 million to help fund this growth. The firm estimates it can sell new shares of stock for $25 a share. It also estimates it will cost an additional $250,000 for filing and legal fees related to the stock issue. The..
What is the internal rate of return on an investment with the following cash flows? Year Cash Flow
What was your realized? return? How much of the return came from dividend yield and how much came from capital? gain?
What is the value today of $3,300 per year, at a discount rate of 8 percent, if the first payment is received 7 years from today and the last payment is received 25 years from today? (Do not round intermediate calculations and round your final answer..
One-year Treasury bills currently earn 1.45 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 1.65 percent. If the unbiased expectations theory is correct, what should the current rate be on 2-year Treasury secur..
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