Finance Problem Types and Words

Finance Problem Types and Words - Finance Chapter 7 Word...

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Finance Chapter 7 Word What coupon rate should the company set on its new bonds if it wants to sell them at Par? Coupon Rate=YTM Find YTM What is the clean price of the bond? Clean= Dirty (Invoice Price/Price you Paid) –Accrued Interest Using the IRS amortization rule, what interest deductions can these companies take on in the first and last year? Find PV of all interest payment Subtract the change between the periods Straight Line Method for Interest Deduction Total Interest/ Number of Periods How many coupons would you need to issue to raise the 45million? How many zeroes would you need to issue? *The coupon bonds has a coupon rate that matches the 6% required return so the bonds would be sold at par ($1,000) *To determine the zeroes find the present value *Amount Needed to Raise/ Price of Each Bond= Amount Issued What will be your companies’ repayment if you issue coupon bonds? Zero bonds? Repayment of Interest on Coupon Bond= Number of Bonds Issued x (FV+Interest)
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