Question
In: Finance
HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans...
HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the yield to maturity for five-year (annual-pay) coupon corporate bonds of various ratings:
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a. |
Assuming the bonds will be rated AA, what will the price of the bonds be? |
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|
b. |
How much total principal amount of these bonds must HMK issue to raise $10 million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number.) |
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c. |
What must the rating of the bonds be for them to sell at par? |
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|
d. |
Suppose that when the bonds are issued, the price of each bond is $959.54. What is the likely rating of the bonds? Are they junk bonds? |
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Amount needed |
1,008.36 |
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|
Maturity |
9917.13 |
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|
Face value |
9,918.00 |
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Coupon rate |
6.50% |
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Solutions
jeff jeffy answered 1 month agoRelated Solutions
HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans...
HMK Enterprises would like to raise $10 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1000 and a coupon rate of 6.5% (annual
payments). The following table summarizes the yield to maturity for
five-year (annual-pay) coupon corporate bonds of various
ratings:
Rating
AAA
AA
A
BBB
BB
YTM
6.20%
6.30%
6.50%
6.90%
7.50%
Rating
AAA
AA
A
BBB
BB
Yield to maturity
7.50%
Price of bonds with various ratings
a....
HMK Enterprises would like to raise $10.0 million to invest in capital expenditures. The company plans...
HMK Enterprises would like to raise
$10.0
million to invest in capital expenditures. The company plans to
issue five-year bonds with a face value of
$1,000
and a coupon rate of
6.53%
(annual payments). The following table summarizes the yield to
maturity for five-year (annual-payment) coupon corporate bonds of
various ratings:
Rating
AAA
AA
A
BBB
BB
YTM
6.15%
6.34%
6.53%
6.98%
7.58%
a. Assuming the bonds will be rated AA, what will be the price
of the bonds?
b....
HMK Enterprises would like to raise $11 million to invest in capital expenditures. The company plans...
HMK Enterprises would like to raise $11 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1,000 and a coupon rate of 8.8%
(annual payments). The following table summarizes the yield to
maturity for five-year (annual-pay) coupon corporate bonds of
various ratings.
Rating
AAA
AA
A
BBB
BB
YTM (%)
8.2
8.4
8.8
9.0
9.4
a. Assuming the bonds will be rated AA, what
will the price of the AA-rated bonds...
HMK Enterprises would like to raise $10.0 million to invest in capital expenditures. The company plans...
HMK Enterprises would like to raise $10.0 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1,000 and a coupon rate of 6.50%
(annual payments). The following table summarizes the yield to
maturity for five-year (annual-payment) coupon corporate bonds of
various ratings:
Rating AAA AA A BBB
BB
YTM 6.20% 6.30% 6.50% 6.90% 7.50%
a. Assuming the bonds will be rated AA, what will be the...
HMK Enterprises would like to raise $ 10.0 million to invest in capital expenditures. The company...
HMK Enterprises would like to raise $ 10.0 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $ 1000 and a coupon rate of 6.51 % (annual
payments). The following table summarizes the yield to maturity
for five-year (annual-payment) coupon corporate bonds of various
ratings:
Rating
AAA
AA
A
BBB
BB
YTM
6.13%
6.36%
6.51%
6.94%
7.53%
a. Assuming the bonds will be rated AA, what will be the price
of...
Question 4 HMK Enterprises would like to raise $10 million to invest in capital expenditures. The...
Question 4
HMK Enterprises would like to raise $10 million to invest in
capital expenditures. The company plans to issue 5-year bonds with
a face value of $1,000 and a coupon rate of 6.52% (annual
payments). The following table summarizes the yield to maturity for
5-year (annual-payment) coupon corporate bonds of various
ratings:
a. Assuming the bonds will be rated AA, what will be the price
of the bonds?
a. $856.32
b. $987.45
c. $999.66
d. $1,008.77
e. $1,019.88
b....
Marlite Engineering would like to raise $ 10.0 million to invest in capital expenditures. The company...
Marlite Engineering would like to raise $ 10.0 million to invest
in capital expenditures. The company plans to issue five-year
bonds with a face value of $ 1 000 and a coupon rate of 6.51 %
(annual payments). The following table summarises the yield to
maturity for five-year (annual-payment) coupon corporate bonds of
various ratings
Rating
AAA
AA
A
BBB
BB
YTM
6.126.12%
6.336.33%
6.516.51%
6.946.94%
7.527.52%
a. Assuming the bonds will be rated AA, the price of the bonds...
Peyton plans to raise $1,000,000 million of additional capital for the coming year. They anticipate that...
Peyton plans to raise $1,000,000 million of additional capital
for the coming year. They anticipate
that it will enable them to earn an additional $600,000 after
tax. What would be the impact on
earnings per share if the raise the $1,000,000 by:
a) issuing 10,000 share of 10% $100 par value convertible
preferred stock, where share
can be coverted into 10 shares of
Peyton common stock?
b) issuing $1,000,000 of 8% convertible bond, each $1,000 bond
can be converted...
Why a company would like to invest in China?
Why a company would like to invest in China?
LifeCycle Biotech Company plans to invest $100 million into a new facility. It plans to use...
LifeCycle Biotech Company plans to invest $100 million into a
new facility. It plans to use $20 million from its reserves and
sell bonds at an interest rate of 4 percent to the public to raise
the remaining $80 million. At the same time the U.S. has a budget
deficit and decides to sell U.S. bonds to the public for 5
percent.
a) Will LifeCycle Biotech Company make the investment?
No
Yes
b) The government is now in competition with...
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