If interest rates are rising, which of the following bonds would you would want to hold? (Ignore default risk factors.) Province of Ontario 4 percent due 09/27 O CN Rail 3.75 percent due 06/20 O Government of Canada 3.5 percent due 04/29 O Maple Leaf Foods 3.5 percent due 11/22
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- Problem 12-22 Calculating the Cost of Debt [LO2] Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below. Bond Coupon Rate Price Quote Maturity Face Value 1 8.60% 106.1 6 years $ 20,000,000 2 6.60 94.3 9 years 38,000,000 3 8.30 104.9 16.5 years 43,000,000 4 8.80 94.7 26 years 58,000,000 If the corporate tax rate is 21 percent, what is the aftertax cost of the company’s debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.A 1-year short-term corporate bond yields 8.50%. The stated rate for the short-term government issued security is 4%. The liquidity premium is 2.75%. What is the default risk premium imputed on the 1-year short-term corporate bond? (Format: XX.XX%)20.1 Evaluate the following statements: S1 The proceeds of a bond with a face amount of P100,000,000 which sells at 102 will be P102,000,000. S2 The proceeds of a bond with a face amount of P100,000,000 which sells at 98 will be P98,000,000. S3 When bonds are issued at a discount, the bonds payable account may be credited for the proceeds from the issue. S4 When bonds are issued at a premium, amortizing the premium using the effective interest method, will increase the amortization. a. Only 1 statement is correct b. All statements are correct c. Only 2 statements are correct d. Only 3 statements are correct e. All statements are incorrect
- Q1 (a) Explain FOUR (4) reasons that influence the changes which make debt securityyields vary. (b) If a government bond is expected to mature in two years and has a current priceof RM950, calculate the bond's interest rate/yield if it has a par value of RM1,000and a promised coupon payment rate of 10%.(c) From part (b) above, illustrate how the bond price/value if the interest rate/yieldmoves up (increase).kk.2 The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 11%. The corporate tax rate is 32%. What would be the approximate after-tax cost of debt for a new issue of bonds? (Round your answer to 2 decimal places.)P6–23 Bond valuation and yield to maturity Mark Goldsmith’s broker has shown him two bonds issued by different companies. Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 7.5%. The first bond is issued by Crabbe Waste Disposal Corporation and has a coupon rate of 6.324% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon rate of 8.8% paid annually. A. Calculate the selling price for each bond. B. Mark has $20,000 to invest. If he wants to invest only in bonds issued by Crabbe Waste Disposal, how many of those bonds could he buy? What if he wants to invest only in bonds issued by Malfoy Enterprises? Round your answers to the nearest integer. C. What is the total interest income that Mark could earn each year if he invested only in Crabbe bonds? How much interest would he earn each year if he invested only in Malfoy bonds?
- Q23 You are considering an investment in 30 year bond issued by Toy Company. The bonds have no special covenants and the 1 yr T bills are currently earning 5.75% The following information is available: Real risk free rate = 2.5% Default Risk Premium = 1.5% Liquidity risk premium = 0.50% Maturity Risk Premium = 2.00% What is the fair interestrate for the toy company bonds?P6–23 Bond valuation and yield to maturity Mark Goldsmith’s broker has shown him two bonds issued by different companies. Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 7.5%. The first bond is issued by Crabbe Waste Disposal Corporation and has a coupon rate of 6.324% paid annually. The second bond, issued by Malfoy Enterprises, has a coupon rate of 8.8% paid annually. D. Assume that Mark will reinvest all the interest he receives as it is paid, and his rate of return on reinvested interest will be 10%. Calculate the total dollars that Mark will accumulate over 5 years if he invests in Crabbe bonds or Malfoy bonds. Your total dollar calculation will include the interest Mark gets, the principal he receives when the bonds mature, and all the additional interest he earns from reinvesting the coupon payments that he receives. E. The bonds issued by Crabbe and Malfoy might appear to be equally good investments because they offer the same yield to…Question 1 2.BT is considering investing in government bonds. The current price of a P100 bond with 10 years to maturity is P88.The bonds have a coupon rate of 6% and repay face value of P100 at the end of the 10 years.Calculate the yield to maturity. 3.Explain four comparative advantages of debt as a source of finance over equity.
- Q.22 You are considering an investment in 30 year bond issued by Toy Company. The bonds have no special covenants and the 1 yr T bills are currently earning 5.25% The following information is available: Real risk free rate = 2.25% Default Risk Premium = 1.25% Liquidity risk premium = 0.50% Maturity Risk Premium = 2.00% What is the inflation premium?PV OF A LUMP SUMSuppose a U.S. government bond promises to pay $2,249.73 three years from now. If the going interest rate on 3-year government bonds is 6%, how much is the bond worth today? Group of answer choices -$2,591 -$1,889 -$2,325 -$2,012Question 5 A Treasury bond is quoted at a price of 103.949. What is the market price of this bond (in S) if the face value is $5,000 ? not round any intermediate calculations. Round your final answer to 2 decimal places and enter it in the box belot