! Please provide steps of those questions in detail.

Question:

1.The most accurate measure of the cost of a company's debt is:

Choose one answer.

A.

The coupon rate of the company's market traded debt.

B.

The yield to maturity of the company's market traded debt.

C.

The company's interest expense.

D.

The yield of an Australian government 10-year bond.

2.

Mt. Langi issues a two-year corporate bond on 31 December, 2012 at the coupon rate of 10.5%, with a face value of $100 and interest paid semi-annually. One year later, the 2-year government bond remained unchanged at 4%, and the risk profile of Mt Langi to add to this risk free rate as compensation has not changed, at 6.5%.

What would be the market price of the Mt Langi 2-year bond one year prior to maturity? (Roundup to two decimal places)

Answer:

Unit

Number

3.

Mt. Langi issues a two-year corporate bond on 31 December, 2012 at the coupon rate of 10.5%, with a face value of $100 and interest paid semi-annually. One year later, the 2-year government bond has risen to 6%, though the risk profile of Mt Langi to add to this risk free rate as compensation has not changed, at 6.5%.

What would be the market price of the Mt Langi 2-year bond one year prior to maturity? (Roundup to two decimal places)

Answer:

Unit

Number

4.

Suess Inc issues a 2-year corporate bond on 31 December, 2012 with a coupon rate of 7.6%, with a face value of $100 and interest paid semi-annually. Eighteen months later, the 2-year government bond has fallen to 1%, though the risk profile of Suess Inc remains that of a BBB-rated company, 2%. What would be the market price of the Suess Inc 2-year bond, 6 months prior to maturity? (Roundup to two decimal places)

Answer:

Unit

Number

5.

A bank recently decided that 6.5% should be added to the risk free rate to compensate it for the risk it would be taking on in lending to Mt Langi. If the 2-year Australian government bond rate is currently 4%, what would be the coupon rate at which a 2-year corporate bond for Mt Langi would be set, taking into account an appropriate cost of risk for the company? (Show as a percentage NOT a decimal.)

Answer:

Number

Unit

6.

If the 10-year Australian government bond rate is currently 3.8%, what would be the coupon rate at which a 10-year corporate bond rate for Seuss Inc would be set, taking into account the fact that the spread for a company with the same (5.6%) probability of default was 2%?

Answer:

Number

Unit

7.

Mt. Langi issues a two-year corporate bond on 31 December, 2012 at the coupon rate of 10.5%, with a face value of $100 and interest paid semi-annually. One year later, the 2-year government bond has fallen to 1%, though the risk profile of Mt Langi to add to this risk free rate as compensation has not changed, at 6.5%.

What would be the market price of the Mt Langi 2-year bond one year prior to maturity? (Roundup to two decimal places)

Answer:

Unit

Number

8.

Suess Inc issues a 2-year corporate bond on 31 December, 2012 with a coupon rate of 7.6%, with a face value of $100 and interest paid semi-annually. Eighteen months later, the 2-year government bond has fallen to 1%, though the risk profile of Suess Inc remains that of a BBB-rated company, 2%. What would be the market price of the Suess Inc 2-year bond, 6 months prior to maturity? (Roundup to two decimal places)

Answer:

Unit

Number