Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.62 percent, a par value of $1,000 per bond, matures in 8 years, has a total face value of $4.2 million, and is quoted at 103 percent of face value. The second issue has a coupon rate of 6.42 percent, a par value of $1,000 per bond, matures in 24 years, has a total face value of $8.5 million, and is quoted at 91 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 40 percent. What is the firm's weighted average aftertax cost of debt? Multiple Choice 3.12% 3.29% 5.77% 4.62% 3.44%

Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.62 percent, a par value of $1,000 per bond, matures in 8 years, has a total face value of $4.2 million, and is quoted at 103 percent of face value. The second issue has a coupon rate of 6.42 percent, a par value of $1,000 per bond, matures in 24 years, has a total face value of $8.5 million, and is quoted at 91 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 40 percent. What is the firm's weighted average aftertax cost of debt? Multiple Choice 3.12% 3.29% 5.77% 4.62% 3.44%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The bonds issued by Party Citeh bear a coupon of 8 percent, payable semiannually. The bond matures in 19 years and has a $1,000 face value. Currently, the bond sells at $981. The yield to maturity (YTM) is ________%.
Two 25-year maturity mortgage-backed bonds are issued. The first bond has a par value of $10,000 and promises to pay a 7.0 percent annual coupon, while the second is a zero coupon bond that promises to pay $10,000 (par) after 25 years, with interest accruing at 6.5 percent. At issue, bond market investors require a 8.5 percent interest rate on both bonds. Now assume that both bonds promise interest at 7.0 percent, compounded semiannually. What will be the initial price for each bond? What is the initial price of Bond 1 and Bond 2?
General Mills has a $1,000 par value, 23-year to maturity bond outstanding with an annual coupon rate of 8.11 percent per year, paid semiannually. Market interest rates on similar bonds are 8.77 percent. Calculate the bond's price today. Round the answer to two decimal places.
Footsteps Co. has a bond outstanding with a coupon rate of 6.3 percent and annual payments. The bond currently sells for $952.05, matures in 19 years, and has a par value of $1,000. What is the YTM of the bond? Multiple Cholce 6.30% 6.08% 5.63% 6.62% 6.76%
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Cardoza issues bonds with a coupon rate of 7%, face value of $210,000, and maturity in 10 years. Interest payments are made semi-annually. The market rate for this type of bond is 6%. Calculate the issue price of the bonds. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice $171,360. $210,000. $195,731. $225,622.
On January 1 of this year, Ikuta Company issued a bond with a face value of $115,000 and a coupon rate of 4 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 5 percent. Ikuta uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. Complete a bond amortization schedule for all three years of the bond's life. 2. What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete a bond amortization schedule for all three years of the bond's life. Note: Round your intermediate calculations and final answers to whole dollars. Date January 01, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 Cash Interest Interest Expense Amortization Book…
Pamsole, Inc. has issued a bond with 40 warrants attached. The bonds have a 15-year maturity and an annual coupon of 10%, and they were issued at their $1,000 par value. The current yield on similar straight bonds is 14%. What is the implied value of each warrant?
Serotta Corporation is planning to issue bonds with a face value of $440,000 and a coupon rate of 12 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) 1. Provide the journal entry to record the issuance of the bonds January 1.
botanica incorporation has bonds with 14 years to maturity, a face value of $1000, a YTM of 8.2 percent, and a current price of 1,132. The bonds make annual payments. what must be the coupon rate on these bonds
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 9.7% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $1,010, then the YTM for this bond is closest to: A. 11.4% B. 7.6% C. 13.3% D. 9.5%
(Bond valuation relationships) Arizona Public Utilities issued a bond that pays $80 in interest, with a $1,000 par value. It matures in 25 years. The market's required yield to maturity on a comparable-risk bond is 7 percent. a: Calculate the value of the bond b. How does the value change if the market's required yield to maturity on a comparable-risk bond () increases to 10 percent or (4) decreases to 6 percent? c. Explain the implications of your answers in part b as they relate to interest-rate risk, premium bonds, and discount bonds. d. Assume that the bond matures in 5 years instead of 25 years. Recompute your answers in parts a and b e. Explain the implications of your answers in part d as they relate to interest-rate risk, premium bonds, and discount bonds. a. What is the value of the bond if the markets required yield to maturity on a comparable-risk bond is 7 percent? $1,116.54 (Round to the nearest cent) b. () What is the value of the bond if the market's required yield to…

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