A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years. To calculate: Amount need to pay for purchase of one of these bonds.

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Answer 1

Question

Chapter 2, Problem 7PS

a.

Summary Introduction

Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.

To calculate: Amount need to pay for purchase of one of these bonds.

b.

Summary Introduction

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

c.

Summary Introduction

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions Assumptions Discount rate (WACC) Common shares outstanding 7.60% 5,029.00 million Net nonoperating obligations (NNO) $(8,747) million NNO is negative, which means that Cisco has net nonoperating investments CSCO ($ millions) DCF Model Reported 2019 Forecast Horizon 2020 Est. 2021 Est. 2022 Est. 2023 Est. Terminal Period Increase in NOA FCFF (NOPAT - Increase in NOA) $ 1241 1303 1368 10673 11207 11767 1437 $ 12354 302 ✓ Present value of horizon FCFF 9918 9679 9445 ✔ 0 × Cum. present value of horizon FCFF $ 0 × Present value of terminal FCFF 0 ☑ Total firm value 0 ☑ NNO -8747 ✓ Firm equity value $ 0 ☑ Shares outstanding (millions) 5029 Stock price per share $ 40.05

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Answer 2

Question

Chapter 2, Problem 7PS

a.

Summary Introduction

Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.

To calculate: Amount need to pay for purchase of one of these bonds.

b.

Summary Introduction

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

c.

Summary Introduction

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

Expert Solution & Answer

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Answer 3

Question

Chapter 2, Problem 7PS

a.

Summary Introduction

Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.

To calculate: Amount need to pay for purchase of one of these bonds.

b.

Summary Introduction

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

c.

Summary Introduction

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

Expert Solution & Answer

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Answer 4

Question

Chapter 2, Problem 7PS

a.

Summary Introduction

Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.

To calculate: Amount need to pay for purchase of one of these bonds.

b.

Summary Introduction

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

c.

Summary Introduction

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

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Answer 5

Chapter 2, Problem 7PS

a.

Summary Introduction

Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.

To calculate: Amount need to pay for purchase of one of these bonds.

b.

Summary Introduction

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

c.

Summary Introduction

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

Answer 6

Chapter 2, Problem 7PS

a.

Summary Introduction

Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.

To calculate: Amount need to pay for purchase of one of these bonds.

Answer 7

Chapter 2, Problem 7PS

a.

Summary Introduction

Introduction: A treasury bond is issued as a debt security. When a government needs funds, it can borrow huge funds by selling treasury bonds or treasury notes. On these bonds, the government pays periodic interest, which is known as the coupon rate. The principal amount is paid on maturity. Treasury bond is issued for a maturity period ranging from 10 to 30 years.

To calculate: Amount need to pay for purchase of one of these bonds.

Answer 8

b.

Summary Introduction

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

Answer 9

b.

Summary Introduction

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

Answer 10

c.

Summary Introduction

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

Answer 11

c.

Summary Introduction

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

Answer 12

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Answer 13

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Answer 14

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Answer 15

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

Solution Summary: The author explains a treasury bond's coupon rate, which is paid by the issuer to the bondholder on the face value or par value.

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.

Want to see the full answer?

Chapter 2 Solutions

Solution Summary: The author explains a treasury bond's coupon rate, which is paid by the issuer to the bondholder on the face value or par value.

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate. To identify: Coupon rate of the bond.

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield. To identify: Yield to maturity of a bond.

Want to see the full answer?

Chapter 2 Solutions

Introduction: Coupon rate refers to the amount of annual interest rate that is paid by the bond issuer to the bondholder on the face value or par value. All the fixed income security pays the coupon rate.

To identify: Coupon rate of the bond.

Introduction: Yield to maturity refers to the estimated return on a bond if the bond is kept till maturity date. It is used to compare the securities and select the security with the highest yield.

To identify: Yield to maturity of a bond.