Question

HMK Enterprises would like to raise $10.0 million for to invest in capital expenditures. The company plans to issue five year bonds with a face value of $1000 and a coupon rate of 6.53% (annual payments) The following table summarizes the yield to maturity for five-year (annual payments) coupon corporate bonds of various ratings:

Rating AAA AA A BBB BB

YTM 6.19% 6.31% 6.53% 6.96% 7.58%

a. Assuming the bonds will be rated AA what will be the price of the bonds?

b How much of the principal of these bonds must HMK issue to raise $10.0 million today, assuming the bonds are rated AA?

c. What must the rating of the bonds for them to sell at par?

d. Suppose that when the bonds are issued, the price of each bond is $957.61 What is the likely rating of the bonds? Are they junk bonds?

a. Assuming the bonds will be rated AA, what will be the price of the bonds?

Answer #1

HMK Enterprises would like to raise $10.0 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1,000 and a coupon rate of 6.59% (annual
payments). The following table summarizes the yield to maturity
for five-year (annual-payment) coupon corporate bonds of various
ratings.
Rating
AAA
AA
A
BBB
BB
YTM
6.19%
6.39%
6.59%
6.98%
7.58%
a. Assuming the bonds will be rated AA, what will the price of
the bonds be?
b....

HMK Enterprises would like to raise $10.0 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1,000 and a coupon rate of 6.59% (annual
payments). The following table summarizes the yield to maturity
for five-year (annual-payment) coupon corporate bonds of various
ratings:
Rating
AAA
AA
A
BBB
BB
YTM
6.16%
6.38%
6.59%
6.91%
7.54%
a. Assuming the bonds will be rated AA, what will be the price
of the bonds?
b....

HMK Enterprises would like to raise $10 million to invest in
capital expenditures. The company plans to issue five-year bonds
with a face value of $1000 and a coupon rate of 6.5% (annual
payments). The following table summarizes the yield to maturity for
five-year (annual-pay) coupon corporate bonds of various
ratings:
Rating
AAA
AA
A
BBB
BB
YTM
6.20%
6.30%
6.50%
6.90%
7.50%
a. Assuming the bonds will be rated AA, what will the price of
the bonds be?
b....

1. HMK Enterprises would like to
raise $10 million to invest in capital expenditures. The company
plans to issue five-year bonds with a face value of $1000 and a
coupon rate of 6.5% (annual payments). The following table
summarizes the yield to maturity for five-year (annual pay) coupon
corporate bonds of various ratings.
Rating
AAA
AA
A
BBB
BB
YTM
6.20%
6.30%
6.50%
6.90%
7.50%
a. Assuming the bonds will be rated
AA, what will the price of the bonds...

a
company wants to raise 30 million dollars to build a new
headquarter. It will fund this by issuing a 10-year bond with a
face value of $1,000 and a coupon rate of 6.3% paid semiannually.
the table below shows the yield to maturity for similar 10-year
corporate bonds of different ratings. Which of the following is
closest to how many more bonds the company would have to sell to
raise this money if their bonds received a BBB rating...

A certain insurance company wants to raise $34 million in order
to build a new headquarters. The company will fund this by issuing
10-year bonds with a face value of $1,000 and a coupon rate of
6.5%, paid semiannually. The table below shows the yield to
maturity for similar 10-year corporate bonds of different
ratings.
Security
AAA Corporate
AA Corporate
A Corporate
BBB Corporate
BB Corporate
Yield (%)
6.20%
6.40%
6.70%
7.00%
7.50%
How many more bonds would the insurance...

Chapter 6
13. Consider the following bonds:
Bond Coupon Rate (annual payments) Maturity (years)
A 0% 15
B 0% 10
C 4% 15
D 8% 10
What is the percentage change in the price of each bond if its
yield to maturity falls from 6% to 5%?
Which of the bonds A–D is most sensitive to a 1% drop in
interest rates from 6% to 5% and why? Which bond is least
sensitive? Provide an intuitive explanation for your answer....

Company A has a debt issue outstanding with a 6% coupon rate and
10 years to maturity. The debt is BB+ rated and is trading at
$913.21 per bond. At this price, the bonds have a yield to maturity
of 7.25%. The 10-year Treasury bond yield is 4.25%. What is Company
A's pretax cost of debt?
Company B has a publicly-traded bond issue of $400 million
outstanding. These bonds have a 5.25% annual coupon rate, 20 years
remaining to maturity,...

1. Price of a bond today: your company wants to raise $600
million by selling bonds. The company has chosen to issue 25-year
semi-annual $1,000 par value bonds with a coupon of 5.5%, rated at
BBB with yield of 6.5%.
a. What will be the price of each
bond? Show calculator inputs, fully labeled.
b. How many bonds will the company
need to sell? Show work.
c. What cash flows does an investor in
this bond receive while she owns...

Caspian Sea Drinks needs to raise $39.00 million by issuing
bonds. It plans to issue a 16.00 year semi-annual pay bond that has
a coupon rate of 5.02%. The yield to maturity on the bond is
expected to be 4.81%. How many bonds must Caspian Sea issue? (Note:
Your answer may not be a whole number. In reality, a company would
not issue part of a bond.)
Submit
Answer format: Number: Round to: 0 decimal
places.
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not_submitted
Attempts Remaining:...

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