Am. 127. Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 12 percent.a. How much would you pay for a 10-year bond with a par value of $1,000 and a 10.4 percent coupon rate? Assume interest is paidannually.b. How much would you pay for a share of preferred stock paying a $6.2-per-share annual dividend forever?c. A company is planning to set aside money to repay $168 million in bonds that will be coming due in ten years. How much moneywould the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? Howwould your answer change if the money were deposited at the beginning of each year?Note: Round your answers to 2 decimal places.a. PVb. PVc1. PMTmillionc2. PMT8.55 million

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 16P

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Hi, I'm working on this corporate finance question from my textbook. How do I solve it using formulas or the financial calculator? A bond promises a risk-free payment of $1000 in one year. The risk-free rate of interest is2.64%. a) What is the price of the bond? b) If the price of the bond is actually $960, what is the arbitrage strategy? Illustrate all cash flowstoday and one year from today.
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. \table[[a. PV,,],[b. PV,,],[c1. PMT,,million],[c2. PMT,9.60,million]]
:38 Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 10 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 8.3 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.7-per-share annual dividend forever? c. A company is planning to set aside money to repay $163 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. a. PV b. PV c1. PMT million tes c2. PMT 9.30 million
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