No more than two pages, double spaced, explaination of equations used, 12 point. 1 inch margins.
Expected yield – You own a 6% bond maturing in two years and priced at 88%. Suppose that there is a 9% chance that at maturity the bond will default and you will receive only 41% of the promised payment.
What is the bond’s promised yield to maturity?
The following table shows some financial data for two companies:
Total assets $1,587.1 $1,600.7
EBITDA –53 77
Net income + interest -73 31
Total liabilities 744.0 1,467.1
- Calculate the probability of default for the two companies.
- Which company has the higher probability?
Refer to the following information:
Amount issued $400 million
Offered Issued at a price of 101.50% plus accrued interest (proceeds to company 101.300%) through First Boston Corporation.
Interest 9.25% per annum, payable February 15 and August 15.
- Suppose the debenture was issued on September 1, 1992, at 101.50%. How much would you have to pay to buy one bond delivered on September 15? Don’t forget to include accrued interest.
- What is the amount of the first interest payment?
ABC Corp. is prohibited from issuing more senior debt unless net tangible assets exceed 150% of senior debt. Currently, the company has outstanding $100 million of senior debt and has net tangible assets of $201 million. How much more senior debt can ABC Corp. issue?
IMO Microsystems’ 12% convertible is about to mature. The conversion ratio is 34. Assume a face value of $1,000.
- What is the conversion price?
- The stock price is $54. What is the conversion value?