Aero Plain Part 1

* b.Assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 50 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm’s straight bonds yield 12%. Assume that each warrant will have a market value of $3 when the stock sells at $20. What coupon interest rate, and dollar coupon, must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.)

1(a) Regular Treasury bonds are purchased at face value in the beginning or an adjusted price prior maturity. And in every period, normally annul or semiannual, investor will receive a coupon as an interest and at the maturity a principal plus coupon.

At what price will the bonds issue? (Do not round PV factors. Round your answer to the nearest dollar amount. Omit the "$" sign in your

1.00 point A bond with a 7-year duration is worth $1,073, and its yield to maturity is 7.3%. If the yield to maturity falls to 7.21%, you would predict that the new value of the bond will be approximately _________.

Assuming the market interest rate on the issue date is 7%, the bonds will issue at $200,000. Record the bond issue on January 1, 2012, and the first two semi-annual interest payments on June 30, 2012, and December 31, 2012.

The Yield to Maturity (YTM) of a bond is:   Interest rate that makes the present value of the bond’s

What coupon rate should AirJet Best Parts set on its new bonds to sell them at par value?

You may use a number of sources, but we recommend Morningstar. Find the YTM of one 15 or 20 year bond with the highest possible creditworthiness. You may assume that new bonds issued by AirJet Best Parts, Inc. are of similar risk and will require the same return. (5 pts)

2. An 8 percent semiannual coupon bond is priced at $1,204.60. The bond has a

a. the same amount of interest expense being recognized over the term of the bonds

Then third parameter is coupon payment of $60 and the fourth parameter is principal of $1000. This value that was determined to be the price of the bond at a 7.5% discount rate is $920.55.

Answer: YTM should be used because it is the rate of return anticipated on a bond if it is held to maturity. The calculation of YTM takes into account the purchase price, redemption value, time to maturity, coupon yield, and time between

If Target issues 9% coupon bonds on 1/1/18 for $12,775,000 due 12/31/22 with semiannual interest payments on July 1st and December 31st, the company would receive $15,011,152 on the date of issuance (1/1/18). The present value of $15,011,152 was calculated using payments of $574,875 every 6 months, compounding for 10 periods, at the rate of 2.5% per period.

So, the 20 year corporate bond interest rate associated with the company’s rating is 3.86.

Describe the differences in interest payments and bond price between a 5 percent coupon bond and a zero coupon bond.