Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years
1 answer:
Answer: -12.1%
Explanation:
Bond Sam was priced at Par which means it could have been priced at $1,000 and its yield was the same as the coupon rate of 8%.
If interest rates rise by 5%, the yield becomes:
= 8% + 5%
= 13%
Price of bond is attached:
Yield = 13% /2 = 6.5% per semiannual period
Coupon = 8% * 1,000 * 0.5 = $40 per semi annual period
Period till maturity = 3 * 2 = 6 semiannual periods
Price = $878.97
Percentage change in price:
= (878.97 - 1,000) / 1,000 * 100%
= -12.1%
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Answer:
Earnings Per Share (EPS) = $1.18
Explanation:
We know,
Earnings Per Share (EPS) =
Here,
Net Income = $2,500,000
Preferred Dividend = Total preferred stock in dollar x cost of preferred stock
Preferred Dividend = $5,000,000 x 8% = $400,000
No. of shares outstanding table is shown below (Weighted):
Shares outstanding + Additional shares - Treasury stock =
[750,000 x stock split] + [300,000 x (8/12) x stock split] - [150,000 x (5/12) x stock split]
= (750,000 x 2) + (200,000 x 2) - (62,500 x 2)
= 1,500,000 + 400,000 - 125,000
= 1,775,000
Now, EPS =
EPS = 1.18 (rounded to 2 decimal places)
<em>Note:</em> 1. As, there is a stock split of 2-for-1, that's why we multiply the stock by 2.
2. Since additional shares are issued on 1st May, therefore, the weight from May to December is for 8 months. Repurchased or Treasury stock should be removed from number of shares.