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Hello! I have 3 more questions that I would love your help with! 1. A previously issued A2, 15-year industrial bond provides a return one-half
Hello! I have 3 more questions that I would love your help with!
1. A previously issued A2, 15-year industrial bond provides a return one-half higher than the prime interest rate of 13 percent. Previously issued A2 public utility bonds provide a yield of one-half of a percentage point higher than previously issued A2 industrial bonds of equal quality. Finally, new issues of A2 public utility bonds pay one-half of a percentage point more than previously issued A2 public utility bonds. What should be the interest rate on a newly issued A2 public utility bond? Interest rate % 2. Assume a zero-coupon bond that sells for $147 will mature in 25 years at $1,600. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. What is the effective yield to maturity? (Assume annual compounding. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) % Effective yield to maturity 3. The Deluxe Corporation has just signed a 156-month lease on an asset with a 18-year life. The minimum lease payments are $3,400 per month ($40,800 per year) and are to be discounted back to the present at a 12 percent annual discount rate. The estimated fair value of the property is $270,000. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Assume the lease is set up as an annual lease. a. Calculate the lease period as a percentage to the estimated life of the leased property. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Lease period percentage % b. Calculate the present value of lease payments as a percentage to the fair value of the property. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) PV of lease payment percentage % c. Should the lease be recorded as a capital lease or an operating lease? (Use criteria 3 and 4 for a capital lease.) Operating lease Capital leaseStep by Step Solution
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