Mette Badminton Equipment Co. wants to raise $7 million to expand operations. To accomplish this, it plans to issue 20-year bond
s with a face value of $1,000. The coupon rate is set at 9% and the couponds will be paid semi-annually. The bonds are priced at a yield-to-maturity of 10%. What is the minimum number of bonds the firm must sell to raise the $7 million
1 answer:
Answer:
7,657 bonds
Explanation:
In order to determine the minimum number of bonds first we have to find out the present value of the bond which is to be shown in the attached spreadsheet.
Data provided in the question
Future value or Face value = $1,000
PMT = $1,000 × 9% ÷ 2 = $45
Rate of interest = 10% ÷ 2 = 5%
NPER = 20 years × 2 = 40 years
The formula is shown below:
= PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value of the bond is $914.20
Now the raise amount is $7 million
So, the number of minimum number of bonds is
= $7,000,000 ÷ $914.20
= 7,657 bonds
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Answer:
Cost of equity will be 12.96 %
Explanation:
We have given current price of the stock = $32.45
Expected dividend in one year
Growth rate
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Cost of equity is given by
Cost of equity = 12.96 %
From the details that are contained in the question, the portfolio standard deviation is 0.0544 or 5.44%
<h3>How to solve for the portfolio standard deviation</h3>w1 = weight of euros 1 = 500000/800000
w2 = weight of canadian dollars = 300000/800000
Standard deviation 1 = 8%
Standard deviation 2 = 3%
Correlation coefficient = 0.30
(w1*σ1)² + (w2*σ2)² + (2* w1*σ1* w2*σ2 * 0.30)^0.5
Therefore the portfolio standard deviation is given as 0.0544 or 5.44%
Read more on standard deviation here: brainly.com/question/475676