please do number Q4 since Q3 is done

Q3. Your firm has a credit rating of AAA. You notice that the credit spread for 10- year maturity debt is 60 basis points (0.60%). Your firms ten-year debt with a face value of $100 has a coupon rate of 4%. You see that new 10-year U.S. Treasury notes are being issued at par with a coupon rate of 3.65%. What should the price of your outstanding 10-year bonds be? K=N*2 Corp bond YTM = 10 year T note rate + credit spread = 3.65 + 0.6 = 4.25% Bond Price = E[(Semi annual Coupon)/(1+YTM/2)^k] + Par value /( 1+YTM/2) ^ N*2 K=10*2 Bond PRice = E[(4*100/200) / (1 + 4.25/200)^k] + 100/(1+ 4.25/200)^10*2 Bond price = 97.98

Q4. Construct a simple numerical example to show the following (Assume that there are 100 shares outstanding at $10 per share, before issue): a. Existing shareholders are made worse off when a company makes a cash offer of new stock below the market price (Say, the company sells 20 shares for cash at $5 per share) b. Existing shareholders are not made worse off when a company makes a rights issue of new stock below the market price even if the new stockholders do not wish to take up their rights (Say, the company makes a rights issue of 20 shares at $5 per share).