Jiminy's Cricket Farm issued a bond with 30 years to maturity and a semiannual couponrate of 7 percent 6 years ago. The bond currently sells for 96 percent of Its face value.The company's tax rate is 25 percent.a. What is the pretax cost of debt? (Do not round Intermediate calculatlons and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)b. What is the aftertax cost of debt? (Do not round Intermedlate calculatlons and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)a. Pretax cost of debtb. Aftertax cost of debt%%c. Which is more relevant, the pretax or the aftertax cost of debt?Aftertax cost of debtO Pretax cost of debt

Bond maturity = 30 years Coupon rate (Semi annual) = 7%/2 = 3.5% Coupon amount = $1000*3.5% = $35…

Answered: Jiminy's Cricket Farm Issued a bond…

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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An investor purchased the following five bonds. Each bond had a par value of $1,000 and a 8% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 7%. What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to the nearest cent and percentage answers to two decimal places. Please see image I am not sure if this counts as one question but it is one in the book.
You have purchased a U.S. Treasury bond for $3,000. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $5,000. What interest rate will you earn on this bond? 3.82% 4.25% 4.72% 5.24% 5.77%
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LotsaDough's bonds have a 20-year maturity, 8% coupon (paid annually), $1000 par (face) value, and are priced at $952.68. What is LotsaDough's cost of debt (ignoring taxes)? Group of answer choices 7.0% 7.5% 8.0% 8.5%
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