Bond value and time-Constant required returns Pecos Manufacturing has just issued a 15 year, 8%
coupon interest rate, $1,000-par bond that pays interest annually. The required return is currently 6%, and the
company is certain it will remain at 6% until t

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Basic bond valuation Complex Systems has an outstanding issue of $1,000-par-value bonds with a coupon
interest rate of 7%. The issue pays interest annually and has 8 years remaining to its maturity date.
a. If bonds of similar risk are currently e

Bondvalue andtiméChanging returns Personal Finance Problem Lynn Parsons is considering
investing in either of two outstanding bonds. The bonds both have $1,000 par values and 1 5% coupon interest
rates and pay annual interest. Bond A has exactly 3 years

BFN 201 Principles of Financ - Exam 1: part 2 Take home ver.d \
Z/
A l) SixLakes, Inc., iswacorporation with 245,600 shareholders with 30% of their 20,000,000 shares
issued and outstanding. During 2011'the rm earned $ 2,575,000 before taxes and the paymen

BFN 201 Principles of Finance 14/! i1, 1 Exam 1: part 2 in-class ver.a
1) Fishy Wishy, Inc. sells high-end (very expensive) shing gear. It is a small corporation with onl: 42,200 shares
held (outstanding) by just 23 shareholders. During 2011 the rm earn

Cost of Long-term Capital
Long-term debt: .
Step 1. Calculate the pre-taX cost of debt (approximation):
Annual Interest + {Face Net Proceeds 1 -
Years to Maturity
3&3 _ 1F ace + Net Proceeds)
, _ 2 _-
Step 2. Calculate the aftertax CQSt of the debt:

9
BO=$80>< Z
1
+$1,000x -
,=1 <1+o.06)t [(1+0.06)9]
B[$8°)x[11 ]+$1ooox[1 ]
° 0.06 (1+0.06)9 (1+0.06)9
Bo=$1,136.03
The value of the bond with 6 years to maturity is:
6
Bo = $80 x I; (1 + (mat + $1,000 x [(1 + 0.06) 6]
B-($80)X[1-1 ]+$1000><[1 ]
'0 0.06

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BFN 201/Prlnciples' of Finance . \ / Id V Exam 3: part 2 - ver.a
I Date:
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1) Seven Sisters, Inc., has just issued 16,500 "bonds" for a total principle (face) value, at maturity (in 20 years),
of $ 16,500,000 . The bonds have a coupon rate o

Basic bond valuation Complex Systems has an outstanding issue of $ 1,000-parvalue bonds with a coupon
interest rate of 7%. The issue pays interest annually and has 8 years remaining to its maturity date.
a. If bonds of similar risk are currently earning a

Beta coefcients and the capital asset pricing model Personal Finance Problem Katherine Wilson is 1
wondering how much risk she must undertake to generate an acceptable return on her porfolio. The risk-free I
return currently is 8%. The return on the avera

if the required return is 15%, the current value of bond A is $1,000.00. Note that when a. bond has a required
rate of return that is equal to the coupon rate, the bond will sell at par (at its par value).
(3) If the required return is 18%, the cu