Question

In: Finance

1. Describe the bonds issued by Microsoft (MSFT) over the three-year period, in terms of par,...

1. Describe the bonds issued by Microsoft (MSFT) over the three-year period, in terms of par, coupon, maturity, price and yield to maturity. Discuss the relationship between bond price and yield to maturity?

2. Compare Microsoft (MSFT) bond yield to the current Treasury bond yield curve. Discuss the factors that lead to the difference of the yields between your firm’s bond and the treasury bond. Be sure to discuss the nominal interest.

Solutions

Expert Solution

1.Microsoft borrowed a 17bn bond on 2017 which is the huge corporate bond in that year.That sale was ranked the largest ever corporate debt sale.Micrisoft also borrowed$20 n to purchase the social network-Linkedin which was the 5th largest bond record at the time.That bond priced with a yield of 2.42 percent for a period of 10 years.Microsoft's existing debt will mature on August 2026 with a yield of 3.22 percent.It was deal that comes after the purchase of LinkedIn.

When coming to the relationship between bond price and yield to maturity ,they are inversely related.Because a rise in price leads to a fall in yield and a fall in price will subsequently lead to rise in yield.

2.Comparing Microsoft and Treasury bond yield , Microsoft has a good yield rate.As it is rising.T he $19.75 billion deal has hit the 30 year Treasury bond with a yield of 2.249 according to reports and was falling.

The factors that could have affected the Treasury bond might be the prevailing interest rate , inflation rate , interest rate expectations and may be the monetary policy.The investor's perception has also impacted in the downfall of the yield.When the federal reserve lowered it's interst rate it created additional demand over Treasury,which leads to lower interest rate.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Below are the holding period returns for the past five years for Microsoft (MSFT) and the...
Below are the holding period returns for the past five years for Microsoft (MSFT) and the S&P 500 Date MSFT S&500 2017 15% 8% 2016 7% 9% 2015 25% 12% 2014 15% 7% 2013 6% 5% a. Calculate the average arithmetic return and standard deviation for MSFT and the S&P500. b. Assuming you are a risk averse investor and expect the next 12 months to be similar to the past twelve months. If you had to make a choice between...
Here are data on ​$1,000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley....
Here are data on ​$1,000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley. Assume you are thinking about buying these bonds. Answer the following​ questions: a. Assuming interest is paid​ annually, calculate the values of the bonds if your required rates of return are as​ follows: Microsoft, 3 percent; GE​ Capital, 8 ​percent; and Morgan​ Stanley, 12 ​percent; where: Microsoft GE Capital Morgan Stanley Coupon interest rate 5.00 % 4.00 % 4.50 % Years to Maturity 29...
Here are data on ​$1,000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley....
Here are data on ​$1,000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley. Assume you are thinking about buying these bonds. Answer the following​ questions: a. Assuming interest is paid​ annually, calculate the values of the bonds if your required rates of return are as​ follows: Microsoft, 5.5 ​percent; GE​ Capital, 17.5 percent; and Morgan​ Stanley, 11.5 ​percent; where: Microsoft GE capital Morgan Stanley Interest Rate 4.50% 6.75% 8% Maturity 26 23 13 Microsoft        ​$798 GE Capital     ​$476...
Here are data on ​$1000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley....
Here are data on ​$1000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley. Assume you are thinking about buying these bonds. Answer the following​ questions: a. Assuming interest is paid​ annually, calculate the values of the bonds if your required rates of return are as​ follows: Microsoft, 6.5 ​percent; GE​ Capital,16.5 ​percent; and Morgan​ Stanley, 10 ​percent; where: MICROSOFT GE CAPITAL MORGAN STANLEY Coupon interest rate       5.25%          7.25​%      8.00​% Years to maturity; Microsoft 31. GE; 26 Morgan...
Here are data on ​$1,000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley....
Here are data on ​$1,000 par value bonds issued by​ Microsoft, GE​ Capital, and Morgan Stanley. Assume you are thinking about buying these bonds. Answer the following​ questions: a. Assuming interest is paid​ annually, calculate the values of the bonds if your required rates of return are as​ follows: Microsoft, 5.5 percent; GE​ Capital, 16.5 ​percent; and Morgan​ Stanley, 12​ percent; where: MICROSOFT GE CAPITAL MORGAN STANLEY Coupon interest rate       5.25%          7.50%      8.00% Years to maturity             26                         22                       18             b....
On January 1, Year1, Boston Group issued $500,000 par value, 12% three-year bonds when the market...
On January 1, Year1, Boston Group issued $500,000 par value, 12% three-year bonds when the market rate of interest was 8%. Interest is payable semiannually on December 31. The following present value information is available: 4% 8% Present Value of $1 (n=5) 0.7903 0.6302 Present value of an ordinary annuity (n=5) 5.2421 4.6229 Present Value of $1 (n=3) 0.8890 0.7938 Present value of an ordinary annuity (n=5) 2.7751 2.5771 What amount is the value of net bonds payable at the...
At the beginning of the year, the company issued $500,000 10-year bonds at par. The holder...
At the beginning of the year, the company issued $500,000 10-year bonds at par. The holder of the bonds can convert $10,000 in bonds into cash based on the performance of the company. Specifically, each $10,000 bond can be converted into cash at the rate of 10% of net income. Draft financial statements reveal net income of $250,000.  prepare a report to the board of directors that discusses the recognition, measurement, and presentation of the financial instruments issued.
The annual data on stock prices and dividends for Microsoft Corporation(MSFT) is as follows: Year Price...
The annual data on stock prices and dividends for Microsoft Corporation(MSFT) is as follows: Year Price (Beginning of the Year) Price (End of the Year) Dividends (End of the Year ) 2005 26.28 28.15 0.29 2006 28.15 30.86 0.33 2007 30.86 32.60 0.37 2008 32.60 17.10 0.41 2009 17.10 28.18 0.46 2010 28.18 27.73 0.55 2011 27.73 29.53 0.68 2012 29.53 27.45 0.83 2013 27.45 37.84 0.97 2014 37.84 46.45 1.15 What will be the IRR if the stock is...
A company issued 10%, 10-year bonds with a par value of $1,000,000 on January 1, 2008,...
A company issued 10%, 10-year bonds with a par value of $1,000,000 on January 1, 2008, at a selling price of $885,295, to yield the buyers a 12% return. The company uses the effective interest amortization method. Interest is paid semiannually each June 30 and December 31. (1) Prepare an amortization table for all the payment periods using the format shown below: (2) Answer the following questions based on your work: (a) Which direction is carrying value going? (b) Describe...
January 1, 2019 ABEF company issued 5-year bonds with a par value of $1,000,000 and a...
January 1, 2019 ABEF company issued 5-year bonds with a par value of $1,000,000 and a 6% annual stated rate of interest. The issue price of the bond was $950,000. Interest payments are made semiannually. Any premiums or discounts should amortized using the straight line method. (Remember when amortizing pay attention to how many periods) Prepare Journal Entries for the following A) Record the issuance of the bonds B) Record interest expense at June 30, 2019 C) Record interest expense...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT