Problem 2. Refer to problem number one. If Mala Inse Corp. sells the bonds after holding it for two years, how much should Mala Inse sell the bonds at P5,000 above the said bond price? Solution: 2

#3 Cost of debt 3. Cost of debt. Kenny Enterprises has just issued a bond with a par value bf $1,000, a maturity of twenty years, and an 8% coupon rate with semiannual payments. What is the cost of debt for Kenny Enterprises if the bond sells at the following prices? What do you notice about the price and the cost of debt? a. $920 b. $1,000 c. $1,080 d. $1,173

#3 Cost of debt

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Vi (H X.) 25) A credit market instrument that pays the owner a fixed coupon payment every year until the maturity date and then repays the face value is called a A) fixed-payment loan. C) simple loan. B) coupon bond. D) discount bond. 25) Pr

How would you solve these using a financial calculator?   What values would you enter for N, I/YR, PV, PMT, and FV? *assume corporate bonds pay 2x annually and have a FV on $1000 *MACRS table attached a) Calculate the YTM of a 20-year corporate bond with a market price of $1,020, interest rate of 4.5% with 15 years left to maturity.  [YTM   b) What is the MACRS depreciation for a 5-year property asset purchased for $50,000 in the 2nd year?

Exercises. 1. Three 2-year bonds have the following cash flows and prices: A. (2,3), PA = 2.5 B. (3, 4), PB = 3.6 C. (4,5), Pc 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity? 2. Three 4-year bonds have the following cash flows and prices: A. (2, 2, 2, 3), PA = 2.5 B. (3, 3, 3, 4), PB = 3.6 C. (4, 4, 4, 5), Pc = 4.8 Is there any arbitrage opportunity? How can you change Pc so there is no arbitrage opportunity?

Question 4

What is the present value (i.e., price) today of a bond that will pay its owner \$1,000,000$1,000,000 five years from today if the discount rate is 4\%4% per annum?