(a) To Discuss: The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio. Introduction: A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond. Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond. The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Question

3 years ago, you invested $9,200. In 3 years, you expect to have $14,167. If you expect to earn the same annual return after 3 years from today as the annual return implied from the past and expected values given in the problem, then in how many years from today do you expect to have $28,798?

Answer 1

Question

Chapter 10, Problem 3PS

Summary Introduction

(a)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Summary Introduction

(b)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's debt-equity ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Debt-equity ratio is the calculation of the extent to which the shareholders equity can meet the obligations of the creditors in the event of a decline.

Summary Introduction

(c)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's quick ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Quick ratio is the measure of a company's ability to pay its short term obligations using its most liquid assets.

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3 years ago, you invested $9,200. In 3 years, you expect to have $14,167. If you expect to earn the same annual return after 3 years from today as the annual return implied from the past and expected values given in the problem, then in how many years from today do you expect to have $28,798?

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Ends Feb 2 Discuss and explain in detail the "Purpose of Financial Analysis" as well as the two main way we use Financial Ratios to do this.

Answer 2

Question

Chapter 10, Problem 3PS

Summary Introduction

(a)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Summary Introduction

(b)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's debt-equity ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Debt-equity ratio is the calculation of the extent to which the shareholders equity can meet the obligations of the creditors in the event of a decline.

Summary Introduction

(c)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's quick ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Quick ratio is the measure of a company's ability to pay its short term obligations using its most liquid assets.

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Answer 3

Question

Chapter 10, Problem 3PS

Summary Introduction

(a)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Summary Introduction

(b)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's debt-equity ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Debt-equity ratio is the calculation of the extent to which the shareholders equity can meet the obligations of the creditors in the event of a decline.

Summary Introduction

(c)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's quick ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Quick ratio is the measure of a company's ability to pay its short term obligations using its most liquid assets.

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Answer 4

Question

Chapter 10, Problem 3PS

Summary Introduction

(a)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Summary Introduction

(b)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's debt-equity ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Debt-equity ratio is the calculation of the extent to which the shareholders equity can meet the obligations of the creditors in the event of a decline.

Summary Introduction

(c)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's quick ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Quick ratio is the measure of a company's ability to pay its short term obligations using its most liquid assets.

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Answer 5

Chapter 10, Problem 3PS

Summary Introduction

(a)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Summary Introduction

(b)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's debt-equity ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Debt-equity ratio is the calculation of the extent to which the shareholders equity can meet the obligations of the creditors in the event of a decline.

Summary Introduction

(c)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's quick ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Quick ratio is the measure of a company's ability to pay its short term obligations using its most liquid assets.

Answer 6

Chapter 10, Problem 3PS

Summary Introduction

(a)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Answer 7

Chapter 10, Problem 3PS

Summary Introduction

(a)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's times-interest-earned ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

The times-interest-earned-ratio is the calculation of a firm's income before interest and taxes divided by the interest expense.

Answer 8

Summary Introduction

(b)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's debt-equity ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Debt-equity ratio is the calculation of the extent to which the shareholders equity can meet the obligations of the creditors in the event of a decline.

Answer 9

Summary Introduction

(b)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's debt-equity ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Debt-equity ratio is the calculation of the extent to which the shareholders equity can meet the obligations of the creditors in the event of a decline.

Answer 10

Summary Introduction

(c)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's quick ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Quick ratio is the measure of a company's ability to pay its short term obligations using its most liquid assets.

Answer 11

Summary Introduction

(c)

To Discuss:

The likely effect on a bond's yield to maturity of an increase in the issuing firm's quick ratio.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Quick ratio is the measure of a company's ability to pay its short term obligations using its most liquid assets.

Answer 12

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Ch. 10 - Prob. 1PS Ch. 10 - Prob. 2PS Ch. 10 - Prob. 3PS Ch. 10 - Prob. 4PS Ch. 10 - Prob. 5PS Ch. 10 - Prob. 6PS Ch. 10 - Prob. 7PS Ch. 10 - Prob. 8PS Ch. 10 - Prob. 9PS Ch. 10 - Prob. 10PS

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