Question

In: Economics

3. Why would entities that issued consul bonds in the past try to repurchase them? Assume...

3. Why would entities that issued consul bonds in the past try to repurchase
them? Assume the purchase price is the present value of the future stream of
payments.

Solutions

Expert Solution

Organization which established as a separate existence for the tax purpose, corporations, limited liability companies and proprietorships are some examples of business entities.

Consul bonds:- Consul bond which is also known as perpectual bond, is fixed income security with no maturity clay. This type of bond is also known as a equity. one main drawback of these bonds is that they are not exchangable.
The price of a consul bonds is the fixed interest payment, divided by constant discount rate which presents the speed at which money value decreases over time.

Formula for the present value of a consul bond

present value=D/r
D=periodic coupon payment of the bond
r= discount rate applied to the bond

Reasons to purchase consul bonds:-

1 consul bonds are of interest to investors because they are steady, predictable sources of income.
2 Some consul bonds has perpetual bonds has boost "step-up" features.
3 Technically referred to as "growing perpetuity".
4 Consul bonds offers periodic interest rate increases.
5 Consul bonds increase interest at predetermined points.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

What external entities use financial ratios and why do they use them?
What external entities use financial ratios and why do they use them?
11-What is the approximate yield to maturity for the following bonds? Assume these are bonds issued...
11-What is the approximate yield to maturity for the following bonds? Assume these are bonds issued in the United States. a.5 years to maturity, 6 percent coupon rate, current price is $950. b.10 years to maturity, 0 percent coupon rate, current price is $339. c.15 years to maturity, 8.5 percent coupon rate, current price is $1030.
Governments (monarchies) of the past issued perpetual bonds as a way to finance wars and other...
Governments (monarchies) of the past issued perpetual bonds as a way to finance wars and other needs. Explain the benefits and costs of issuing such perpetual bonds. Who benefits if the perpetual bond is callable?
Complete the missing information. Assume the bonds are issued at face value.
  Question: Reporting current and long-term liabilities Pediatric Dispensary borrowed $390,000 on January 2, 2018, by issuing a 15% serial bond payable that must be paid in three equal annual installments plus interest for the year. The first payment of principal and interest comes due January 2, 2019. Complete the missing information. Assume the bonds are issued at face value. December 31 2018 2019 2020 Current Liabilities: Bonds Payable $ $ $ Interest Payable Long-term Liabilities: Bonds Payable
Explain why most bonds which are issued for the international community issued in only a few...
Explain why most bonds which are issued for the international community issued in only a few specific currencies? Which currencies are most widely used?
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and...
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and also signed a 3 and 1/2 -year lease with PH Corp. Payments of $10,000 on the lease are made at the end of the year for years 1,2 and 3 and ($5,000 in the last period; year 4.) There are no provisions for a bargain purchase or an extension of the lease term. The asset has a fair value of $35,000 and has a...
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and...
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and also signed a 3 and 1/2 -year lease with PH Corp. Payments of $10,000 on the lease are made at the end of the year for years 1,2 and 3 and ($5,000 in the last period; year 4.) There are no provisions for a bargain purchase or an extension of the lease term. The asset has a fair value of $35,000 and has a...
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and...
On January 1, 2018, Corp X issued 3%, 3 ½ year Bonds to the public, and also signed a 3 and 1/2 -year lease with PH Corp. Payments of $10,000 on the lease are made at the end of the year for years 1,2 and 3 and ($5,000 in the last period; year 4.) There are no provisions for a bargain purchase or an extension of the lease term. The asset has a fair value of $35,000 and has a...
1)Bonds issued by the Asian Development Bank (ADB) would most likely be: quasi-government bonds. supranational bonds...
1)Bonds issued by the Asian Development Bank (ADB) would most likely be: quasi-government bonds. supranational bonds global bonds. 2) Will Smith, is estimating a value for an infrequently traded bond with 6 years to maturity, an annual coupon of 7%, and a single-B credit rating. Kate obtains yields-to-maturity for more liquid bonds with the same credit rating: 7% coupon, 8 years to maturity, yielding 7.20%. 7% coupon, 5 years to maturity, yielding 6.40%. The infrequently traded bond is most likely...
Describe a bond issued at par. Explain why an investor would purchase a bond issued at...
Describe a bond issued at par. Explain why an investor would purchase a bond issued at par instead of a bond issued at a discount or a bond issued at a premium (In Detail)
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT