PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 24, Problem 18PS
Convertible bonds The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2015. Each bond has the following features.
- a. What is the bond’s conversion value?
- b. Can you explain why the bond is selling above conversion value?
- c. Should Surplus call? What will happen if it does so?
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Exercise: Dirty/cleanPrice calculation
A bond has face value of $1000. The bond’s yield to maturityis 6% andthe annual coupon rate is 8% with semiannual coupon payments.The maturity of the bond is 5years. The bond was issued on 1/1/2017, and one bought on 4/1/2018.
Answer the following three questions:
a.What is the dirty price of the bond?
b.What is the accrual interest of the bond?
c.What is its clean price?
A particular country's treasury issued a 35-year bond on October 15, 2014, paying 5.625% interest. Thus, if you bought $100,000 worth of these bonds you would receive $5,625 per year in interest for 35 years. An investor wishes to buy the rights to receive the interest on $100,000 worth of these bonds. The amount the investor is willing to pay is the present value of the interest payments, assuming a 6% rate of return. Assuming (incorrectly, but approximately) that the interest payments are made continuously, what will the investor pay? HINT [See Example 6.] (Round your answer to the nearest cent.)
X Ltd issued a loan on 1 January 2015 and classified it as measured at amortised cost.
Terms:
Nominal value GHS50 million
Coupon rate 10%
Term to maturity 3 years
Purchase price GHS48 million
Effective rate 11.67%
Required:
Show the double entry for each year to maturity of the bond. (Ignore loss allowances)
Chapter 24 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 24 - Bond terms Use Table 24.1 (but not the text) to...Ch. 24 - Bond terms Look at Table 24.1: a. The AMAT bond...Ch. 24 - Bond terms Select the most appropriate term from...Ch. 24 - Prob. 5PSCh. 24 - Bond terms Bond prices can fall either because of...Ch. 24 - Security and seniority a. As a senior bondholder,...Ch. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Security and seniority a. Residential mortgages...Ch. 24 - Sinking funds For each of the following sinking...
Ch. 24 - Call provisions a. Look at Table 24.1. Suppose...Ch. 24 - Covenants Alpha Corp. is prohibited from issuing...Ch. 24 - Prob. 14PSCh. 24 - Private placements Explain the three principal...Ch. 24 - Convertible bonds True or false? a. Convertible...Ch. 24 - Convertible bonds Maple Aircraft has issued a 4%...Ch. 24 - Convertible bonds The Surplus Value Company had 10...Ch. 24 - Prob. 19PSCh. 24 - Convertible bonds Iota Microsystems 10%...Ch. 24 - Convertible bonds Zenco Inc. is financed by 3...Ch. 24 - Prob. 22PSCh. 24 - Prob. 23PSCh. 24 - Bank loans, commercial paper, and medium-term...Ch. 24 - Prob. 25PSCh. 24 - Tax benefits Dorlcote Milling has outstanding a 1...Ch. 24 - Convertible bonds This question illustrates that...Ch. 24 - Prob. 28PS
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