CORPORATE FINANCE - CONNECT ACCESS
CORPORATE FINANCE - CONNECT ACCESS
12th Edition
ISBN: 9781264054893
Author: Ross
Publisher: MCG
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Chapter 24, Problem 8CQ

Convertible Bonds Why will convertible bonds not be voluntarily converted to stock before expiration?

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A commercial real estate investment fund must report its quarterly investment performance to investors. A summary of its (1) beginning and end-of-quarter assets and equity and (2) cash inflows and outflows during the quarter are as follows: Beginning of Quarter During Quarter $64 million Cash $10 million NOI from operations $514 million Market value of props $2 million Paid management fees $34 million Other Investments $25 million Distributions to investors $328 million Fund debt $214 million Investor contributions     $189 million Property acquisitions     $39 million Property dispositions The other investments will earn 4 percent interest (1 percent per quarter) and fund debt will be at a 6 percent rate (1.5 percent per quarter). The properties were appraised at the end of the quarter for $669 million. Assume any interest on short-term investments is offset by interest paid on short-term debt. Required: What would be the beginning equity value? What would be the…
The Green Mortgage Company has originated a pool containing 75 ten-year fixed interest rate mortgages with an average balance of $103,200 each. All mortgages in the pool carry a coupon of 12 percent. (For simplicity, assume that all mortgage payments are made annually at 12 percent interest.) Green would now like to sell the pool to FNMA. Required: Assuming a constant annual prepayment rate of 10 percent (for simplicity, assume that prepayments are based on the pool balance at the end of each year), what would be the price that Green should obtain on the date of issuance if market interest rates were (1) 11 percent? (2) 12 percent? (3) 9 percent? Assume that five years have passed since the date in (a). What will the pool factor be? If market interest rates are 12 percent, what price can Green obtain then? Instead of selling the pool of mortgages in (a), Green decides to securitize the mortgages by issuing 100 pass-through securities. The coupon rate will be 11.5 percent and the…
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