Question
In: Finance
A) The coupon rate on a debt issue is 8%. If the yield to maturity on...
A) The coupon rate on a debt issue is 8%. If the yield to maturity on the debt is 9%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 41%?
a. 3.96%
b. 5.31%
c. 7.46%
d. 6.66%
B) Expected cash dividends are $5.00, the dividend yield is 5%, flotation costs are 8% of price, and the growth rate is 4%. Compute the approximate cost of new common stock.
a. 9.43%
b. 9.18%
c. 10.43%
d. 11.53%
Solutions
jeff jeffy answered 2 years agoRelated Solutions
The duration of a bond with 8% annual coupon rate when the yield to maturity is...
The duration of a bond with 8% annual coupon rate when the yield
to maturity is 10% and two years left to maturity is:
Question 10 options:
1)
1.75 years
2)
1.80 years
3)
1.92 years
4)
2.96 years
Consider a bond with a 10% coupon and with yield to maturity = 8%. If the...
Consider a bond with a 10% coupon and with yield to maturity =
8%. If the bond’s YTM remains constant, then in one year, will the
bond price be higher, lower, or unchanged? Please explain your
answer and give examples to help demonstrate your
explanation.
A bond has a maturity of 10 years, has 8% coupon rate(paid annually) and the yield...
A bond has a maturity of 10 years, has 8% coupon rate(paid
annually) and the yield to maturity is 10%. WHat is the price of
the bond? (face value is 1000)
A zero-coupon bond with 4 years to maturity and the yield to maturity of 8%. When...
A zero-coupon
bond
with 4 years to
maturity and the yield to maturity of 8%. When the yield
increases,
the duration
of this bond
decreases.
a. True b.
False
2) A bond issuer often
repurchases Callable
bonds for
a discount
bond.
a. True b.
False
Credit
Default Swap (CDS) is an insurance policy on default
risk of corporate bond or loan.
a. True b.
False
4) The delivery of the
underlying asset is seldom made in forward
contracts while the...
A 12.25-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 12.25-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 139.2 and
modified duration of 11.34 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-12.30 years—but
considerably higher convexity of 272.9.
a. Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What...
A 12.75-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 12.75-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 150.3 and
modified duration of 11.81 years. A 30-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical duration—11.79 years—but considerably
higher convexity of 231.2.
Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What
percentage capital...
A 13.05-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 13.05-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 120.2 and
modified duration of 11.91 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-11.65 years—-but
considerably higher convexity of 280.2.
a.
Suppose the yield to maturity on both bonds increases to 9%.
What will be the actual percentage capital loss on each bond? What...
A 13.05-year maturity zero-coupon bond selling at a yield to maturity of 8% (effective annual yield)...
A 13.05-year maturity zero-coupon bond selling at a yield to
maturity of 8% (effective annual yield) has convexity of 157.2 and
modified duration of 12.08 years. A 40-year maturity 6% coupon bond
making annual coupon payments also selling at a yield to maturity
of 8% has nearly identical modified duration—-12.30 years—-but
considerably higher convexity of 272.9.
a. Suppose the yield to maturity on both bonds
increases to 9%. What will be the actual percentage capital loss on
each bond? What...
If the yield to maturity and the coupon rate are the same, then the bond should...
If the yield to maturity and the coupon rate are the same, then the
bond should sell for ______.
a. a premium b. a discount c. par value
What is the coupon rate of an annual coupon bond that has a yield to maturity...
What is the coupon rate of an annual coupon bond that has a
yield to maturity of 5.5%, a current price of $949.81, a par value
of $1,000 and matures in 15 years?
6.33%
4.70%
3.07%
5.00%
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