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Bond yield and issuance

JRJ Corporation recently issued 10-year bonds at their par value, $1,000. These bonds pay $60 in interest each 6 months; their price has remained stable since they were issued, they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000, and pay $40 in interest every 6 months. If both bonds have the same yield, how many bonds must JRJ issue to raise $2,000,000 cash (ignore flotation costs)? a. 2,400 b. 2,596 c. 3,000 d. 5,000 e. 4,275

Subject:

Business

Topic:

Finance

Posting ID:

10019

OTA ID:

103234

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Multiple choice question on bonds

Which one of the following statements is most correct? a. All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required rate of return for a bond of similar risk is 8%. b. Debentures generally have a higher yield to maturity relative to mortgage bonds. c. If there are two bonds with equal (time to) maturity and credit (default) risk, the bond which is callable will have a higher yield to maturity than the bond which is non - callable. d. Choices a and c are correct. e. Choices b and c are correct. Discuss fully the reasons for your choice, the discuss briefly why the other choices are not correct.

Subject:

Business

Topic:

Finance

Posting ID:

10020

OTA ID:

103477

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Practice Problem

Walk me through the steps to do this on a TI BA II Plus and the rationale. Pablo's Pizza International Inc.'s common stock currently sells for $20 per share. The stock has just paid an annual dividend of $1.00 (D0 = $1.00). The dividend is expected to grow at a constant rate of 10% per year. (Pr. 10-3) a. Calculate the stock price expected 1 year from now. b. Calculate the required rate of return on PPI's common stock. SHOW ALL WORK.

Subject:

Business

Topic:

Finance

Posting ID:

10327

OTA ID:

101733

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Practice Problem

Walk me through the steps to do this on a TI BA II Plus and the rationale. EMC has preferred stock outstanding which pays a dividend of $5.00 at the end of each year. This stock was issued in perpetuity and has no maturity date. EMC's preferred stock sells for $60 per share. (Pr. 10-4) Calculate this preferred stock's required rate of return SHOW ALL WORK.

Subject:

Business

Topic:

Finance

Posting ID:

10329

OTA ID:

103879

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Practice Problem

Walk me through the steps to do this on a TI BA II Plus and the rationale. Your broker offers to sell you some shares of Swift and Co. common stock that has just paid an annual dividend of $2.00 (yesterday). You expect the dividend to grow at the rate of 5% per year for the next 3 years, and, if you buy the stock, you plan to hold it for 3 years and then sell it. (Pr. 10-14) a. Determine the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. (Note: D0 = $2.00.) b. Swift and Co.'s appropriate discount rate is 12%; the first of the expected dividend payments will occur 1 year from now. Calculate the present value of the dividend stream; that is, ... click for more

Subject:

Business

Topic:

Finance

Posting ID:

10331

OTA ID:

103957

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