Ying Imports has several bond issues outstanding, each making semi-annual interest payments called coupons. These interest payments represent an annuity, and though paid semi-annually, they are quoted as an annual percent of face value. The face value represents the amount that must be repaid when the loan matures, and is usually equal to the original amount borrowed. Hence a 10% annual coupon typically means that the company has a 10% annual percentage interest rate (APR) on their loan, and pays off the interest every six months by paying 5% interest on the face value. The current market price of a bond (i.e. what a bank would be willing to sell the loan for) is usually also quoted as a percent of face value. The yield to maturity represents the discount rate that sets the present value of the bond's cash flows (the coupons and the repayment of face value at maturity) equal to the bond's price. Since the coupons are paid semi-annually, this yield is quoted as an APR with semi-annual compounding just like the coupons. Ying Imports' bonds are listed in the following table. If the corporate tax rate is 31 percent, what is the after-tax
Ying Imports has several bond issues outstanding, each making semi-annual interest payments called coupons. These interest payments represent an annuity, and though paid semi-annually, they are quoted as an annual percent of face value. The face value represents the amount that must be repaid when the loan matures, and is usually equal to the original amount borrowed. Hence a 10% annual coupon typically means that the company has a 10% annual percentage interest rate (APR) on their loan, and pays off the interest every six months by paying 5% interest on the face value. The current market price of a bond (i.e. what a bank would be willing to sell the loan for) is usually also quoted as a percent of face value. The yield to maturity represents the discount rate that sets the present value of the bond's cash flows (the coupons and the repayment of face value at maturity) equal to the bond's price. Since the coupons are paid semi-annually, this yield is quoted as an APR with semi-annual compounding just like the coupons. Ying Imports' bonds are listed in the following table. If the corporate tax rate is 31 percent, what is the after-tax
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
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