(Solution) If An American Water Company Bond Has A Coupon Rate Of 9% And Is Selling For $890, Then The Yield To Maturity (market Interest Rate) Must Be ____.... | Snapessays.com


(Solution) If an American Water Company bond has a coupon rate of 9% and is selling for $890, then the yield to maturity (market interest rate) must be ____....


questions1).

 

If an American Water Company bond has a coupon rate of 9% and is selling for $890,

 

then the yield to maturity (market interest rate) must be ____.

 

a)

 

greater than 9%

 

b) equal to 9%

 

c) less than 9%

 

d) cannot be determined

 

2) In order for a company to benefit from calling an issue of bonds, the interest savings

 

must offset the ____.

 

a) call premium to redeem the outstanding bonds

 

b)

 

issuance costs related to the new bonds (underwriter’s fees)

 

c) transaction costs/professional fees related to the new bonds

 

d) all the above

 

3) What is the value of an Orion bond that has a 10% coupon, pays interest annually,

 

and has 10 years to maturity, if the required rate of return is 12%?

 

a) $1,106.42

 

b) $906.38

 

c) $1,000.00

 

d)

 

$887.00

 

4) Heleveton, Inc. currently pays a common stock dividend of $2.00 per share (D0).

 

Dividends are expected to increase by $0.50 per share next year. Determine the current

 

value of Heleveton's common stock to an investor who expects to be able to sell the

 

stock for $32 after one year. Assume that the investor requires a 12% rate of return on

 

the security.

 


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This question was answered on: May 23, 2022

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