Was the bond a good deal for investors

Assignment Help Financial Management
Reference no: EM131116025

In 1985, R. J. Reynolds (RJR for short) acquired Nabisco Brands and financed the deal with a variety of financial instruments, including three dual-currency Eurobonds. The first dual-currency bond, leadmanaged by Nikko, raised JPY25 billion (equivalent to USD105.5 million at the time of issue). Coupons were paid in yen, but the required final principal payment was not JPY25 billion but USD115.956 million. The coupon was 7.75%, even though a comparable fixed-rate Euroyen bond at that time carried only a 6.375% coupon. The actual 5-year forward rate at the time was around JPY200/USD.

a. Given the "fat" coupon, is this bond necessarily a great deal for the investors?

b. At maturity, in August 1990, the exchange rate was actually JPY144/USD.

Was the bond a good deal for investors?

Reference no: EM131116025

Questions Cloud

Appropriate standard error required : (a) Calculate the appropriate standard error required. (b) Calculate the respective z-score you would use to determine the probability that the sample mean grade will be less than 75.
What constitutes significant influence : What constitutes “significant influence” when an investor’s financial interest is below the 50% level?
Briefly explain why an ethnocentric orientation often lead : Briefly explain why an ethnocentric orientation often lead to the standardization of products. Briefly explain why a company can be successful when it target markets to consumers in low income countries.
Distinguish between the accounting treatment for available : Distinguish between the accounting treatment for available- for-sale equity securities and trading equity securities.
Was the bond a good deal for investors : Given the "fat" coupon, is this bond necessarily a great deal for the investors? At maturity, in August 1990, the exchange rate was actually JPY144/USD. Was the bond a good deal for investors?
Prepare the entry to record the sale of these securities : Harry Company sold 10,000 shares of Potter Co. common stock for $27.50 per share, incurring $1,770 in brokerage commissions.
Normally distributed population : Suppose we have the following data: From a normally distributed population we take a sample of size 25, the mean of the sample is 2.2 and the sample standard deviation is 0.42.
What individual factors affect community health : Every individual affects the community in some way. What individual factors (personal characteristics, genetics, developmental stage of life, lifestyle) affect community/public health?
Develop a cost-estimating equation for monthly labor costs : Use the information from the high- and low-volume months to develop a cost-estimating equation for monthly labor costs - What factors might have caused the difference in the equations developed for requirements

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the worth of this deal to the player

In 2011, a running back signed a contract worth $70.9 million. The contract called for $11.5 million immediately and a salary of $4.3 million in 2011, $11.1 million in 2012, $11.5 million in 2013, $10.2 million in 2014 and 2015, and $12.1 million in ..

  Standard deviation of diversified portfolio of common stocks

What is the typical relationship between the standard deviation of an individual common stock and the standard deviation of a diversified portfolio of common stocks?

  Assumption about market equilibrium

Suppose that stock L sells for $50 today and is expected to pay a dividend of $3.00 at the end of one year. Firm L's beta is 1.20, the market expected return is 10%, and the riskless return is 3%. Using the CAPM and an assumption about market equilib..

  What is the effective annual rate on your loan

You have budgeted $450 per/month to purchase an automobile. You can obtain a 5-year new car loan for 6%, Annual Percentage Rate (APR). How much will you be able to borrow? Also, what is the Effective Annual Rate (EAR) on your loan?

  Briefly define reverse leveraged buyouts

Briefly define reverse leveraged buyouts. How have companies that have engaged in reverse LBOs performed relative to their industry peers that have not engaged in such deals? Cite relevant research to support your conclusions.

  Income tax rate table for ten year averaging calculation

A person at retirement is expected to receive a fully taxable Lump-Sum distribution of $245,000. What will be the effective tax rate on this distribution based on 10 year Forwarding Average rate? Use 1986 Income Tax Rate Table for Ten Year Averaging ..

  Investment analysis and portfolio management

Compute the effect of this estimated change in inflation on the price of a 15-year, 10% coupon bond with a current yield to maturity of 8%.

  What is the overall rate of return on the portfolio

One year ago, an American investor bought 2000 shares of London Bridges at a price of £24 (or 24 UK pounds) per share when the exchange rate was $1.4/1£ (or $1.40 dollars = 1 pound). The investor also invested 4,000,000 Japanese Yen in a money market..

  Use the present value formula

Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, etc. Select something which costs somewhere between $2,000 and $50,000..

  Deposit a regular amount every three months until he retires

A man is planning to retire in 25 years. He wishes to deposit a regular amount every three months until he retires, so that, beginning one year following his retirement, he will receive annual payments of $60,000 for the next 10 years. How much must ..

  Produce widgets-economy is strong after-tax profit of firm

Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget. Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget. If the economy is..

  Payment dates-determine when a firm must pay

Payment dates. Determine when a firm must pay for purchases made and invoices dated on November 25 under each of the following credit terms

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd