Debt securities and interest rates

Module 6 introduces a number of different types of debt security instruments. Identify at least three different categories of debt instruments, and compare and contrast them in terms of risk as well as potential for return.  

The overall interest rate of a debt security consists of a number of different components. Identify each of the components, describe each, and explain why they form a part of the overall interest rate profile of the security.

Summarize your findings in a two to three page paper.

Problem: Capital Structure and the WACC

 

Percent Debt (%)	After Tax Debt Cost (%)	Cost of equity (%)
0	-----	14
15	5	18
45	9	22
67	12	25
78	16	30

 

Determine the WACC for each scenario

Determine the optimal mix of debt and equity.

Present your findings in a spreadsheet, and provide the rationale for your answers.

 

Assignment Expectations:

• Length:
  • Spreadsheet
  • 500-750 words in document; answers must thoroughly address the questions in a clear, concise manner
• Structure:
  • Include a title page and reference page in APA style. Separate each section in your paper with a clear heading that allows your professor to know which bullet you are addressing in that section of your paper. Support your ideas with at least three (3) citations in your essay. Make sure to reference the citations using the APA writing style for the essay. The cover page and reference page do not count towards the minimum word amount.
• References:
  • Include the appropriate APA style in-text citations and references for all resources utilized to answer the questions