in June of this year, a company issued bonds that are scheduled to mature three years from now in June. The coupon rate is 5.75 percent and is paid semiannually. The bond issue was rated AAA. (LG7-7) a. Build a spreadsheet that shows how much money the firm pays for each interest rate payment and when those payments will occur if the bond issue sells 50,000 bonds. b. If the bond issue rating would have been BBB, then the coupon rate would have been 6.30 percent. Show the interest payments with this rating. Explain why bond ratings are important to firms issuing capital debt. c. Consider that interest rates in the economy increased in the first half of this year. If the firm would have issued the bonds in January of this year, then the coupon rate would have only been 5.40 percent. How much extra money per year is the firm paying because it issued the bonds in June instead of January?
in June of this year, a company issued bonds that are scheduled to mature three years from now in June. The coupon rate is 5.75 percent and is paid semiannually. The bond issue was rated AAA. (LG7-7) a. Build a spreadsheet that shows how much money the firm pays for each interest rate payment and when those payments will occur if the bond issue sells 50,000 bonds. b. If the bond issue rating would have been BBB, then the coupon rate would have been 6.30 percent. Show the interest payments with this rating. Explain why bond ratings are important to firms issuing capital debt. c. Consider that interest rates in the economy increased in the first half of this year. If the firm would have issued the bonds in January of this year, then the coupon rate would have only been 5.40 percent. How much extra money per year is the firm paying because it issued the bonds in June instead of January?
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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Transcribed Image Text:Spreadsheet Problem: Bond Ratings and Interest Rate Changes Say that
in June of this year, a company issued bonds that are scheduled to
mature three years from now in June. The coupon rate is 5.75 percent
and is paid semiannually. The bond issue was rated AAA. (LG7-7)
a. Build a spreadsheet that shows how much money the firm pays for
each interest rate payment and when those payments will occur if the
bond issue sells 50,000 bonds.
b. If the bond issue rating would have been BBB, then the coupon rate
would have been 6.30 percent. Show the interest payments with this
rating. Explain why bond ratings are important to firms issuing capital
debt.
c. Consider that interest rates in the economy increased in the first half
of this year. If the firm would have issued the bonds in January of this
year, then the coupon rate would have only been 5.40 percent. How
much extra money per year is the firm paying because it issued the
bonds in June instead of January?
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