| Author | Message | ||
     Cinejeevi Side Hero Username: Cinejeevi Post Number: 4098 Registered: 01-2008 Posted From: 91.103.41.50 Rating: N/A |
1> GP&L sold $1,000,000 of 12%, 30-year, semiannual payment bonds 15 years ago. The bonds are not callable, but they do have a sinking fund, which requires GP&L to redeem 5% or the original face value of the issue each year ($50,000), beginning in year 11. To date, 25% of the issue has been retired. The company can either call bonds at par for sinking fund purposes or purchase bonds on the open market, spending sufficient money to redeem 5% of the original face value each year. If the nominal yield to maturity (15 years remaining) on the bonds is currently 14%, what is the least amount of money GP&L must put up to satisfy the sinking fund provision? 2> Jones design wishes to estimate the value of its outstanding preferred stock. The preferred issue has an $80 par value and pays an annual dividend of $6.40 per share Similar-risk preferred shares are currently earning a 9.3% annual rate of return. a. What is the market value of the outstanding preferred stock? b. If an investor purchases the preferred stock at the value indicated in part a, how much would she gain or lose per share if she sells the stock when the required rate of return on similar-risk preferreds has risen to 10.5% jagamE maaya! bratukE maaya!! |
