Annual rate of return (Compound ) earned on a debt security purchased on a given day and held to maturity, is:

Yield to maturity

Real Rate of Interest

None of the answers

Intrinsic interest rate

Nominal Rate of Interest

Inflation rate

Coupon interest rate

Find the value of a bond maturing in 6 years, with a $1,000 par value and a coupon interest rate of 12% (6% paid semiannually) if the required return on similar-risk bonds is 14% annual interest (7% paid semiannually).

985.4

None of the answers

1145.2

920.6

846.15

1218.0

1036.9

Cash inflows and outflows directly related to the sale and production of the firms goods and services, are called:

Capital Flows

Changes in Shareholders Equity

Investment Flows

None of the answers

Financing Flows

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Company X is contemplating selling $10 million worth of 20-year, 10% coupon (stated annual interest rate) bonds, each with a par value of $1,000. Because bonds with similar risk earn returns greater than 10%, the firm must sell the bonds for $980 to compensate for the lower coupon interest rate. The flotation costs are 2% of the par value of the bond (0.02 * $1,000), or $20. The net proceeds to the firm from the sale of each bond are therefore $960 ($980 minus $20). Calculate the annual cost (IRR) of this bond.

16.2%

17.00%

10.49%

9.45%

11.36%

7.12%

13.85%