Fall 2022 - Corporate Finance I - Tutorial 2 PDF

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Corporate Finance I Bonds Tutorial – Part Two 1) A) junk bond. B) floating rate bond. C) zero coupon bond. D) subordinated debenture. Answer: C 2) A) interest and gain in value. B) interest. C) gain in value. D) tax reduction. Answer: C 3) A) junk bond B) zero coupon bond C) floating rate bond D) extendible notes Answer: B 4) A) $11,212 B) $12,393 C) $15,505 D) $18,880 E) $20,000 Answer: C Hint: basic present value equation 5)

A) real return on investment is more than 15 percent. B) nominal return on investment is more than 15 percent. C) nominal return on investment is less than 11 percent. D) real return on investment is equal to 4 percent. Answer: B

6) Answer: 100/1100 = 9.1%

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7)

Answer: $1,114.90 8) ? Answer: Coupon payment = 1,000 × 0.10 = $100 1) PV = $1,134.00 2) $1,000 since coupon rate and required rate of return are equal. 3) PV = $887 Hint: refer to the previous tutorial and lecture slides for the detailed equations....