Question
In: Finance
Octopus Transit has a $1,000 par value bond outstanding with 10 years to maturity. The bond...
Octopus Transit has a $1,000 par value bond
outstanding with 10 years to maturity. The bond carries an annual
interest payment of $84, payable semiannually, and is currently
selling for $1,095. Octopus is in a 30 percent tax bracket. The
firm wishes to know what the aftertax cost of a new bond issue is
likely to be.
a. Compute the Yield to maturity on the old issue and use this as
the Yield for the new issue.
Yield on new issue....
b. Make the appropriate tax adjustments to determine the aftertax cost of debt.
Cost of debt....
issue
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Octopus Transit has a $1,000 par value bond outstanding with 10 years to maturity. The bond...
Octopus Transit has a $1,000 par value bond outstanding with 10
years to maturity. The bond carries an annual interest payment of
$106, payable semiannually, and is currently selling for $1,111.
Octopus is in a 40 percent tax bracket. The firm wishes to know
what the aftertax cost of a new bond issue is likely to be. The
yield to maturity on the new issue will be the same as the yield to
maturity on the old issue because the...
A bond has a par value of $1,000, a time to maturity of 10 years, and...
A bond has a par value of $1,000, a time to maturity of 10
years, and a coupon rate of 8.20% with interest paid annually. If
the current market price is $820, what will be the approximate
capital gain of this bond over the next year if its yield to
maturity remains unchanged? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Capital Gain=?
A bond has a par value of $1,000, a time to maturity of 10 years, and...
A bond has a par value of $1,000, a time to maturity of 10
years, and a coupon rate of 8% with interest paid annually. If the
current market price is $750, what is the capital gain yield of
this bond over the next year?
A bond has a par value of $1,000, a time to maturity of 10 years, and...
A bond has a par value of $1,000, a time to maturity of 10
years, and a coupon rate of 8.70% with interest paid annually. If
the current market price is $870, what will be the approximate
capital gain of this bond over the next year if its yield to
maturity remains unchanged? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Capital gain
$
BP has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon...
BP has a bond outstanding with 15 years to maturity, a $1,000
par value, a coupon rate of 6.8%, with coupons paid semiannually,
and a price of 95.49 (percent of par).
What is the cost of debt?
answer 3+ decimals
Airborne Airlines Inc. has a $1,000 par value bond outstanding with 30 years to maturity. The...
Airborne Airlines Inc. has a $1,000 par value bond outstanding
with 30 years to maturity. The bond carries an annual interest
payment of $108 and is currently selling for $850. Airborne is in a
20 percent tax bracket. The firm wishes to know what the aftertax
cost of a new bond issue is likely to be. The yield to maturity on
the new issue will be the same as the yield to maturity on the old
issue because the risk...
bond has a $1,000 par value, 10 years to maturity, and a 8% annual coupon and...
bond has a $1,000 par value, 10 years to maturity, and a 8%
annual coupon and sells for $980.
What is its yield to maturity (YTM)? Round your answer to two
decimal places.
b)Assume that the yield to maturity remains constant for the
next 3 years. What will the price be 3 years from today? Do not
round intermediate calculations. Round your answer to the nearest
cent
2)Nesmith Corporation's outstanding bonds have a $1,000 par
value, a 8% semiannual coupon,...
A bond has a $1,000 par value, 10 years to maturity, and a 8% annual coupon...
A bond has a $1,000 par value, 10 years to maturity, and a 8%
annual coupon and sells for $980.
What is its yield to maturity (YTM)? Round your answer to two
decimal places.
%
Assume that the yield to maturity remains constant for the next
5 years. What will the price be 5 years from today? Do not round
intermediate calculations. Round your answer to the nearest
cent.
INTEREST RATE SENSITIVITY
An investor purchased the following 5 bonds. Each...
YIELD TO MATURITY AND FUTURE PRICE A bond has a $1,000 par value, 10 years to...
YIELD TO MATURITY AND FUTURE PRICE A bond has a $1,000
par value, 10 years to maturity, and a 7% annual coupon and sells
for $985.
A. What is its yield to maturity (YTM)?
B. Assume that the yield to maturity remains constant
for the next three years. What will
the price be 3 years from today?
A bond has a par value of $1,000, a time to maturity of 20 years, and...
A bond has a par value of $1,000, a time to maturity of 20
years, and a coupon rate of 7.10% with interest paid annually. If
the current market price is $710, what will be the approximate
capital gain of this bond over the next year if its yield to
maturity remains unchanged? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Capital gain ___$
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