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 value of one-month call option with exercise price

The stock price of Heavy Metal (HM) changes only once a month: either it goes up by 20% or it falls by 16%. Its price now is $46. The interest rate is 9% per year, or about 0.75% per month. What is the value of a one-month call option with an exercis..

  Trying to save time on my exam by learning how

Future Value At age 25 you invest $1,800 that earns 9 percent each year. At age 30 you invest $1,800 that earns 12 percent per year. In which case would you have more money at age 60? Trying to save time on my exam by learning how

  Do electronic devices inhibit or encourage critical thinking

Do electronic devices inhibit or encourage critical thinking? Why/Why not? Provide 1 example that supports your belief. What kinds of problems can multi tasking solve? What problems does it create?

  Find market value of the bonds using semiannual analysis

Cox Media Corporation pays a coupon rate of 7 percent on debentures that are due in 10 years. The current yield to maturity on bonds of similar risk is 6 percent. The bonds are currently callable at $1,070. Find the market value of the bonds using se..

  Sell through retail outlets

On June 1st, 2016, Swatch expects to ship 3,500,000 watches from its Swiss plant to the US that it will sell through retail outlets on 270-day terms at $65 each. Therefore Swatch will receive payment from these outlets on February 25th, 2017. What ar..

  The value of firm under each of the two proposed plans

Gael Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 185,000 shares of stock outstanding. What is the value of the firm under each of the two pr..

  Calculate the bonds price today

General Mills has a $1,000 par value, 12 year bond outstanding with an annual coupon rate of 3.60% per year paid semi annually. Market interest rates on similar bonds are 12.70%. Calculate the bonds price today.

  Calculate the companys weighted-average cost of capital

The expected rate of return on the shares is 12%. Calculate the opportunity cost of capital for an average-risk Whispering Pines investment. Next, suppose the company issue debt, repurchases shares, and moves to a 30% debt to value ratio (D/V=.30). C..

  Why are some risks non-diversifiable

In broad terms, why is some risk diversifiable? Why are some risks non-diversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?

  Common sources of short-term financing include

Common sources of short-term financing include:

  Maximizing the present value of the growth opportunities

The objective of the capital budgeting decision is to maximize the stock price of the company, and it is achieved by maximizing the present value of the growth opportunities.

  Sells extended warranties for durable consumer goods

Peace of Mind, Inc. (PMI), sells extended warranties for durable consumer goods such as washing machines and refrigerators. When PMI sells an extended warranty, it receives cash up front from the customer, but later PMI must cover any repair costs th..

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