Current yields for t-bonds, Financial Accounting

ACT presently is all-equity financed. This reflects the stance of the former CEO, a dominant personality who stated repeatedly: "I don't want us to be in thrall to the demands of the banks". However, since appointment of a new chief, change is in the wind and the new CEO is obviously thinking about use of debt to augment the present equity finance. In this regard, the CEO has sent you an email that has just reached your inbox, containing the following points:

a) I am aware that ACT is too small to obtain a bond rating, but in 2010 the Federal budget announced plans for a new scheme that will enable small bond issues (at least $50 million) to be listed on the ASX. What requirements would we have to satisfy in order to qualify for listing?

b) If we made an issue with a face value of $50 million for 5 years, what would be the approximate yield required by investors? My friend, who works for PIMCO (Australia), has told me that we would have to offer about 2.5% p.a. above the yield on Commonwealth Treasury Bonds.

[assume that the bonds would be issued at par, with half-yearly coupons]

c) Pimco has also advised me that there would be issue costs of about 2% of the face value. What impact would that have on an issue?

d) I have heard mention of a 'discount bond'. Would we benefit from this for our bonds? Can you show me how this works?

e) I have seen in recent times that some of the big Aussie banks issued covered bonds, apparently at attractive yields. What are they and are they suitable for us?

To answer the CEO's email, you have researched the current yields for T-bonds, which include the following observations:

maturity

yield

1 year

5.8%

3 years

5.9%

5 years

6.1%

10 years

6.3%

Posted Date: 2/21/2013 1:48:44 AM | Location : United States







Related Discussions:- Current yields for t-bonds, Assignment Help, Ask Question on Current yields for t-bonds, Get Answer, Expert's Help, Current yields for t-bonds Discussions

Write discussion on Current yields for t-bonds
Your posts are moderated
Related Questions
As an asset The argument for this statement is that the survivorship policy is an investment because eventually the partnership will receive either the surrender value or the s

What is a cash budget? How it is useful in managerial decision making?

Q. Show the investment appraisal method? The investment appraisal method is concerned with assessing the value of future cash flows compared to the cost of investment. Since fu

PVA ∞ = A(1 + k) -1 +  A(1 + k) -2 +..... + A(1 + k ) ∞ + 1 + A (1 + k) ∞ Multiplying both the sides of Eq (a7) by (1+k) provides: PVA ∞  = (1 +k) = A(1 +k) +A (1 +k)

The objective is to assess the incentive to acquire information on consumer characteristics. We consider a monopoly. The firm incurs no production cost. There are M consumers with

How should I handle Booking an invoice in one month for Raw material that has not been received until the following month?

1. Will implementing SAP R/3 across the entire PCD division provide the division with a competitive advantage?  Justify your answer carefully. 2. The Raleigh team promised IBM c

Types of interest given under a will The interest given in a legacy, devise or gift of residue may be of the following kinds:- 1. Vested: A vested interest gives an immedi

THE STATEMENT OF CHANGES IN EQUITY This is a very important report because it explains the movements in the shareholder funds during the year and also acts as a link between the

Minority interest (MI) When the holding company owns less than 100% of the ordinary share capital of the subsidiary company then the other balance is held by minority interest. T