Questions On Brady Bonds

b. What would be the value of each bond if they had annual coupon payments?

(d) $1 billion 10 year debenture @ 7.5% with 18.18 warrants at $ 55 exercisable until 1988.

Inflation erodes the purchasing power of a bond 's future cash flows. A rise in inflation will cause investors to demand higher yields to compensate for inflation rate risk. Also, prices will tend to drop because the bond will be paying interest with less purchasing power.

The bonds can be issues with fixed interest or variable rate interest, each of which has its advantages and there disadvantages.

* b.Assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 50 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm’s straight bonds yield 12%. Assume that each warrant will have a market value of $3 when the stock sells at $20. What coupon interest rate, and dollar coupon, must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.)

1(a) Regular Treasury bonds are purchased at face value in the beginning or an adjusted price prior maturity. And in every period, normally annul or semiannual, investor will receive a coupon as an interest and at the maturity a principal plus coupon.

Its coupon rate is 8.3%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 5.3%. The modified duration of this bond is ______ years.

Part B 1. (20 points) Interest rate and currency swap Using the table of swap rates, assume Trident enters into a three year swap agreement to receive euros  and  pay  Japanese  yen,  on

The bonds have 20 years to maturity, pay interest at 9.3%, have a par value of $1,000 and are currently selling for $890.

Assuming that comparable bonds are paying 8 percent, what is the approximate dollar price for which you could sell your bond?

So, the 20 year corporate bond interest rate associated with the company’s rating is 3.86.

b. Generate a graph or table showing how the bond’s present value changes for semi-annually compounded interest rates between 1% and 15%.

The market value of debt was calculated using the existing yield of maturity on a 5 yar bond issued on a private placement basis on July 1, 2000. With the coupon of 5.75% and the discount price of 97, YTM for this bond is 6.62%. With a discount price being 97, the market value of debt is 17,654M.

2. The discount rate for this bond would be 0.70%. I started with an appropriate discount rate to derive my bond purchase price, since I would not purchase a bond without finding out ahead of time what a good price should be.

Besides the lowest coupon rate in Switzerland, we further calculate the bond repayment in determining which currency Carrefour better choose to issue its 10-year bond. Given all the data in which we will use it as out inputs in this case, using Excel to calculate the bond repayment and total interest rate over 10 years period.