Reference no: EM131867901
Yield to call
Seven years ago the Singleton Company issued 23-year bonds with a 11% annual coupon rate at their $1,000 par value. The bonds had a 6% call premium, with 5 years of call protection. Today Singleton called the bonds.
Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. Round your answer to two decimal places. _____%
Explain why the investor should or should not be happy that Singleton called them. choose the correct answer below
Since the bonds have been called, interest rates must have risen sufficiently such that the YTC is greater than the YTM. If investors wish to reinvest their interest receipts, they can now do so at higher interest rates.
Since the bonds have been called, interest rates must have risen sufficiently such that the YTC is greater than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates.
Since the bonds have been called, investors will receive a call premium and can declare a capital gain on their tax returns.
Since the bonds have been called, investors will no longer need to consider reinvestment rate risk.
Since the bonds have been called, interest rates must have fallen sufficiently such that the YTC is less than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates.
|
What is their nominal yield to maturity
: A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 8% semiannual coupon, What is their nominal yield to maturity?
|
|
Assume bond is currently selling at par value
: Assume a bond is currently selling at par value. What will happen in the future if the yield on the bond is lower than the coupon rate?
|
|
Considering adding appliances to its offerings
: Loveland, Inc. is furniture store that is considering adding appliances to its offerings.
|
|
Calculate each project npv using the firm cost of capital
: Calculate each project's NPV using the firm's cost of capital (discount rate) of 8%.
|
|
Compute the realized rate of return for an investor
: Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called.
|
|
Chosen eastern mountain sports as your comparable
: You’re starting an athletic clothing chain and have chosen Eastern Mountain Sports as your comparable.
|
|
Looking at new sausage system with installed cost
: The sausage system will save the firm $200,000 per year in pretax operating costs, and the system requires initial investment in net working capital of $37000.
|
|
Exports products to german firm and will receive payment
: Graylon, Inc., based in Washington, exports products to a German firm and will receive payment of €200,000 in three months.
|
|
Compute break-even point in units
: Compute the break-even point in units. Compute the sales volume in units necessary to generate an after-tax net income of $10,000.
|