Please answer questions fully. Definition type answers will not be accepted.
- You bought AAA bonds yielding 5% with 20 years to maturity when the interest rates were 4%. After 8 years you sold these bonds when inter rates were 8% Compute the gain or loss on this transaction, interest compounded annually?
- A 10% bond pays annually matures in 12 years. The bond is currently selling for $1,071.60. What is the bond’s yield to maturity?
- ShuMae purchased a bond that offered an YTM of 10%. The bond had 5 years to maturity and the company paid coupons and the principal as scheduled during the 5 years. ShuMae, a graduate of ulv saved these coupons in her saving account that paid 5% annual rate. ShuMae is happy that although interest rates had dropped considerably in the 5 years, she was still able to earn 10% average return on her bond investment. How would you respond to Alia?
- You are interested in 9.5% preferred, par 50. Similar-risk preferred are currently yielding 10.7%. How much are you willing to pay for this stock?
- A 5% preferred stock with a par of 100 is currently for $105 with a current yield (cost) of 4.76%. Investment bankers advised the firm that a new preferred if issued will require a yield (cost to the firm) of 6%. What is the floatation percentage?
- A company is selling $50 million in new bonds. ML Inc. the managing underwriter has 40 per cent participation in the syndicate it has formed. The syndicate will buy the bonds from the company at $986 per bond. And sell them to the public for $996 each. The selling concession will be $5 per bond. The issue will generate administrative expenses of $100,000. ML requires a manager’s fee of 12 percent of the gross spread. How much will ML receive if the issue is a sell out? (From IB compensation handout Problem )
- Discuss the impact of issuance of securities on the capital markets.
- What is rule 415 and 144? Explain fully how it helps the firm in their issuance of securities?
- Discuss the role of investment banker in issuance of common stock.
- Explain the following:
- Gross underwriting spread and its various components.
- Road show
- Building the book
- Green shoe provisio
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