Managerial Finance

Dixita Patel Chapter 6 homework Managerial Finance July 31, 2012 Critical opinion 6.6. verifier localize: how does wedge final paymentr decide on the appropriate coupon point to laid on its stick tos? explain the difference between the coupon rate and the required snub away on a bond toll? Coupon rate is the annual coupon divided by the nerve value of a bond. In this case attach Issuers facial expression at outstanding bonds of comparable maturity and risk. The yields on such(prenominal) bonds are used to create the coupon rate inseparable for an exacting issue to initially sell at par. bond certificate issuers also basically learn possible purchasers what coupon rate would be necessary to attract them. The required strike is what investors actually demand on the issue, and it will change finished with(predicate) time. The difference between coupon rate and required throw are equal only if the bond sells for exactly par. Questions and problems business sector # 3 Bond monetary values: Zevon Inc., has 7 portionage coupon bonds on the commercialise that have 8 percent left to maturity. The bonds make annual payments. If the YTM on these bonds is 9 percent, what is the accredited bond outlay? Bond value= C*[1-1(1+r)^t]/r + F/(1+r)^t = 70*[1-1(1+0.09)^8]/0.09 + kelvin/(1+0.09)^8 = 889.

30 Problem # 13 Using Treasury quotes: locate the treasury issue in figure 6.3 maturing in June 2023. Is this note or a bond? What is coupon rate? What is its urge price? What was the foregoing twenty-four hour periodlights asked price? Ans. The coupon rate, located in the second column of the quote is 6.25%. The bid price is supply ship price = 128:19 = 128.19/32 Bid ! price= (128.59375/100)*1000 =1285.9375 The previous eld ask price is found by: forward days asked price= Todays asked price- change Previous days asked price=128.21/32-106/32 Previous days asked price=125.34375 The previous days price in dollor was: Previous days dollor price=(125.34375/100)*1000 = 1253.4375If you lack to get a full essay, order it on our website: OrderEssay.net

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