Question
Q1a: Assume you issue 500 bonds with the following characteristics: 30 year fixed bonds with a principal of $1,000, coupon rate of 7.80%, and YTM
Q1a: Assume you issue 500 bonds with the following characteristics: 30 year fixed bonds with a principal of $1,000, coupon rate of 7.80%, and YTM of 10.0%. Coupon payments are paid annually.How much money are you able to raise through this bond offering?
Possible Answers: $384,415, $408,193, $396,304
Given the same assumptions from question 1, what will be the price of the bond if the YTM is 7.8%?
Possible Answers: $970, $1,000, $910
Given the same assumptions from question 1, how much money will be raised if the principal amount is changed to $2,000?
(Already know the answer is $792,608, but please include.)
Given the same assumptions from question 1, what is the bond price is YTM drops to 3.0%?
Possible Answers: 970.32, 1,943.23, 1,940.82
Q1b: Assuming your company just paid a dividend of $2.50, your dividend is expected to grow by 5.0% for the first 10 years, your investors have an expected return of 10.0%, and your dividend terminal growth is 3.5%, how much are you able to raise if you issue 1,200,000 shares of stock?
Possible Answers: 56 mill, 53 mill, 55 mill
Assuming all of the assumptions of question 1b, how much money can you raise if you raise your initial dividend amount to $3.50?
(Already know the answer is 75 mill, but please include.)
Assuming all of the assumptions of question 1b, if investors lowered their expected return to 5.5%, what would the new stock price be?
Possible Answers: $100, $155, $148
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started