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Zepler [3.9K]
3 years ago
12

Will owns a bond with a make-whole call provision. The bond matures in 13 years but is being called today. The coupon rate is 8.

25 percent with interest paid semiannually. What is the current call price if the applicable discount rate is 7.75 percent and the make-whole call provision applies
Business
1 answer:
marshall27 [118]3 years ago
3 0

Answer:

Total Current Call Price =$1,668.36

Explanation:

Calculation of Present value of bond's coupon payment that is lost by premature termination of bond:

PV = C / i [1 - 1 / (1 + i)^n]

C = Coupon amount = 1,000 x 8.25% = 82.50 / 2 = 41.25

n = Number of payment period = 13 x 2 = 26

i = Rate of Interest= 7.75 / 2 = 3.875%

PV = 41.25 / 0.03875 [1 - 1 / (1 + 0.03875)^26] = $668.36

Add: Face value = 1,000

Total Current call price = 668.36 + 1,000 = $1,668.36

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Answer:

a) true

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Since the DSO of a firm given is 28 days, which is lower than the 30 days credit period normally offered by the company, therefore it may indicate that the firm's credit department is operating effectively.

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7 0
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Financial literacy means . . .?
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Answer:

F. C and D only

Explanation:

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8 0
4 years ago
You purchased 1,400 shares of Barrett Golf Corp. stock at a price of $19.00 per share. While you owned the stock, you received d
raketka [301]

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3 0
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julsineya [31]

Answer:

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