Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 9.00% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Answer Format: Currency: Round to: 4 decimal places.

Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 9.00% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Answer Format: Currency: Round to: 4 decimal places.

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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McCue Inc.'s bonds currently sell for $1,245. They pay a $80 annual coupon, have a 7-year maturity, and a $1,000 par value, but they can be called in 4 years at $1,080. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.) O 0.56% O 0.86% O 0.66% O 0.76% 0.96%
A 10-year bond of a firm in severe financial distress has a coupon rate of 10% and sells for $900. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. what are the stated and expected yields to maturity of bonds? The bond makes its coupon payments annually. Do not round intermediate calculations. ( Round your answers to 2 decimal places.).
Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 8.75% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Submit Answer format: Currency: Round to: 4 decimal places.
Avicorp has a $10.8 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93.65% of par value. a. What is Avicorp's pretax cost of debt? b. If Avicorp faces a 35% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. The cost of debt is % per year. (Round to two decimal places.)
(Cost of debt) Sincere Stationery Corporation needs to raise $508,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10.2 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 7.1 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent?
J&R Renovation, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 20 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has a coupon rate of 5 percent annually. a. What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 22 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
I would like to understand how to solve this in Excel. Hardware Inc. bonds are selling in the market for $960.45. These bonds carry a 9 percent coupon paid semiannually, and have 15 years remaining to maturity. What is the capital gain yield assuming that the interest rates will remain constant over the year?
Your company wants to raise $7.5 million by issuing 10-year zero-coupon bonds. If the yield to maturity on the bonds will be 8% (annual compounded APR), what total face value amount of bonds must you issue? The total face value amount of bonds that you must issue is $ (Round to the nearest cent.)
An insurance company must make payments to a customer of $10 million in one year and $5 million in five years. The yield curve is flat at 10%. Required: a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. What must be the face value and market value of that zero-coupon bond? Note: Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. a. Maturity of zero coupon bond b. Face value b. Market value years million million
You want to receive $5,000 per month in retirement. If you can earn 0.8% return per month and you expect to need the income for 28 years, how much do you need to have in your account at retirement? $582,032 $589,511 $596,123 $575,298 A firm has issued a bond. The bond has a 6% coupon, paid semiannually, a current maturity of 15 years, and sell for $1,273.8. The firm’s marginal tax rate is 21%. What’s the firm’s after-tax component cost of debt? 3.62% 2.86% 6.00% 12%
(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 9 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent?
A mortgage pass-through security (PT) has a par value of $100,000, a 4% coupon paid monthly, and is based on 30 year mortgages. The current market rate for similar bonds is 3.5%, and prepayments currently equal $100 per month. Assume rates immediately rise to 4.5%, and prepayments drop to $40 as a result. The PT will now be paid off in month 310. What is the price of the PT today? Group of answer choices: $98,323.2214 $184,274.6844 $94,737.4877 $102,365.1248

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