Essays on Coupon

(a)Discuss the conceptual merit(s) of each of the date-of-issue balance sheet presentations shown above for these bonds. (b)Explain why investors would pay $1,085,800 for bonds that have a maturity value of only $1,000,000. The difference between the present value and the maturity value of the bond depends on the interest rate and the coupon rate. If the coupon rate of a bond is greater than the yield to maturity rate, then it will trade at a premium to its face value. Therefore, it is clear that the bonds of Nicholas company are ...

Apple manufactures iPhone, its mobile brand, iPad, Mac, the personal computer brand, iPod, the Apple TV brand, a few software applications, a couple of operating systems, and some accessories. The company also sells digital applications through the Apple’s own app store, iBooks store and Macintosh app store. The Company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. The company also sells third-party mobiles, related computer hardware and software, and related accessories. These products are sold via the company’s ...

The use of free samples is one among many subtle marketing strategies used by fast food companies in the United States. Most fast food companies mainly use free samples when introducing new food products into the market. Usually, customers are not aware of how the new food products taste or smell, and the free samples, therefore, give them an opportunity to try them before buying them. Even though this marketing technique seems subtle and unobtrusive, of important to note is that it can create an instant demand for selected products. For instance, a free cookie sample to a child ...

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Abstract

When an organization has cash inflows and outflows of foreign nature, the cash forecast for every currency will help during the identification of the currency exposures. The format of the estimation should allow the users to determine the balance for every currency and whether there is a growing shortage or extra money over time based on reasonable cash flows. The increasing gaps between the cash inflows and outflows may need hedging, and the cash flows that offset over time represents the issue of timing effectively. The management of foreign exchange transaction can be achieved through the offsetting transactions to ...

Abstract

Individuals and business organizations with investment potential or the desire to become investors often find themselves having limited capital to undertake the desired projects. Additionally, most investors are often confused when carrying out analysis to assess the risk of the various portfolio in which they intend to invest their resources. The governments have developmental projects that require more financial resources than their revenue due to budget deficits. Having excess money in the circulation is dangerous to an economy because it results in excess aggregate demand that produces inflationary gaps. As such, the government must regulate money supply to ensure ...

Bishop V Armstrong Aggregate Company

Facts Summary. Aggregates Company sent a letter of offer to the plaintiff on 2nd May to sell scrap mica at $180 per ton. The petitioner received the letter on the following day. Some few weeks later, Bishop learned that the market price had rocketed to $185 per ton. Bishop wrote to the respondent on 22nd purporting to accept the offer. Armstrong received the letter on May 30th, Armstrong repudiated the offer and adjusted the offer to sell at $ 187, the current market price. Legal Issues. Under this case, the court would have to make a determination on three issues. ...

Introduction to Convertible Bonds

Convertible bonds consist of the bonds that are easily converted into the stocks. These convertible bonds are issued by the company and like any other normal bonds it has maturity date and face value. The convertible bondholder has all the rights of converting the bond into the predetermined share numbers of the respective company in an identified period. The factors influencing the bondholder converting or not depend on the stock interest rates and prices.

Contract conditions and Payoffs

The convertible bonds market conditions are not standardized and hence making it differ depending on every contract case. The maturity date being one of the ...

QUESTION A

Credit Default Swap It is a financial instrument lenders use to hedge default risk. The lender acquires a CDS and pays premiums to the CDS seller who takes the default risk (Lasher 200). If the borrower defaults, then the CDS seller pays the par value of the loan to the lender. The CDS seller also pays the protection buyer accrued interests on the loan during the intervening period.

Cash flows in case of no default

Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly payments = 40,000/4 = $10,000 A will pay quarterly CDS premiums to B for the three years. At the end of ...

QUESTION A

Definition of Credit Default Swaps A CDS is an instrument used to transfer the risk of default or credit exposure between two or more parties (Fabozzi and Kothari, 2008). It protects the lender from the possible loss of default by the borrower. The lender (protection buyer) pays premiums to the CDS seller. In return, the CDS seller guarantees to pay the lender the face value of the loan plus interests due in the intervening period if the borrower defaults.

Cash flows

Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly payments = 40,000/4 = $10,000 The borrower does not default ...

QUESTION A

A Credit Default Swap is a swap that protects the lender from the risk of loss resulting from the default by the borrower. The protection buyer of the CDS (the lender) makes periodic income payments (CDS premiums) to the protection seller who in return guarantees to pay the lender the principal in case the borrower defaults.

Cash flows when there is no default

Notional amount = $1 million Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly CDS premium = $10,000 If the borrower does not default, the protection seller will make a profit of $120,000 at the end of the third year ($10,000 ...

Even though we may or may not notice, but the concept of time value of money surrounds us all the time in the form of compounding. The concept of time value of money asserts that the present value of a dollar received today is more than the one to be received in the future. In other words, money has the power of compounding and no rational person will forego his consumption without being compensated for it in the form of interest. For instance, if a person invest his funds in bonds, he is rewarded with fixed coupon payments on ...

The firm does not have debt. Therefore, the firm value is the outstanding number of shares multiplied by market share price. Value of Wrigley’s = 232.44 million *56.37 = 13.103 billion dollars

We assume that Wrigley uses the debt that has been raised to pay dividends to shareholders

Value of Wrigley’s = Market value of Equity + Debt Value Value of Wrigley’s = 13.103 billion + 3 billion = 16.103 billion dollars The proposed coupon rate is 13 percent. After the re-capitalization, the total debt ratio will be 73 percent. Therefore, the Bond will be rated between grade BB and grade B. The effective debt yield for a grade B debt security is 14.67 percent while that if grade ...

Value of Financial Instrument

Value of Financial Instrument It can be noticed from the above-provided table that Microsoft (AAA) has less yield to maturity as compared to others. The negative relationship is observed between rating and yield to maturity. The B-rated company that is Goldman Sachs has higher yield to maturity as compared to others. The highest yield-to-maturity rate is of Rolta that is 6.9 as the company is rated the lowest in the market regarding bonds . The coupon rates and yield-to-maturity are determined by comparing it with other bonds available in the market. The bonds are traded at par value that is ...

Question one

The mobile coupons are more advantageous the traditional paper coupons in that sometimes a customer may forget to carry the paper coupons from the residential areas. But most people do keep their mobile phones with them, and there is no otherwise that they can misplace the coupons. The paper coupons need to be cut and clipped while m-coupons are easily stored in the phones. Similarly, they can be deleted easily from the cell phones after their use. Therefore, it can assist to limit the wastage of papers, and this will aid in environmental conservation. The Broadway café will benefit ...

Business case scenario analysis

Abstract The successful enterprise Three Guys Garage is facing challenges for expansion, succession planning, and the use of innovation in their services. Growing the brand can result to the loss of operational and service quality control while not doing so will limit TGG’s sustainability in the future. Growing the brand also provides enormous opportunities for their apparent successors to gain experience in running a large enterprise. Franchising the TGG brand provides at least three advantages in the expansion and planning fronts: easy access to better managerial talents; easy access to expansion capital; and significantly minimized risk exposure. However, ...

Analyzing Bond Issue: Bank of America

About the company Founded in the year 1904 by Amadeo Peter Giannini and headquartered in Charlotte, North Carolina, Bank of America, is an American multinational banking company that provides financial services to retail as well as institutional customers. The company is one of the largest companies in the United States and operates through five business segments, namely, Consumer Banking, Global Wealth & Investment Management, Global Banking, Global Markets, and Legacy Assets & Servicing. The company through its subsidiaries also provides asset management and risk management services. The company operates in more than 40 countries and serves 56 million customers in the ...

The employee performance management is a term which designates the strategies that a company undertakes to ensure that employees work within the guides of the enterprise’s objectives and goals. Coupon initiates the same in its activities by making sure that every employee remains true to his or her duties. The fundamental reason for employee performance management in the company is due to its vehement growth that has seen the company having many outlets including China and other parts of the world. In fact, being that most of its activities take place online, it becomes inherent to maintain good ...

BUSINESS FINANCING

Introduction Business owners and managers seeking financing encounters an essential decision regarding choice of whether to borrow money or to make use new equity capital. Given that equity and debts have very varied characteristics, each of them has different effect on cash-flow, earnings, and taxes as well as on balance sheet. They also have different impacts on any company`s dilution, leverage as well as a host for other financial metrics by which companies are measured. Lastly, each business financing options presents a different kind of relationship in relation to the financing source. Thus, a company`s plan on ...

Q: Determine the annual effective financing percentage cost of the yen-denominated notes issued in each of the three scenarios in the Blades case for the future value of the yen.

Scenario 1: No change in value of yen Scenario 2: 2% appreciation in the value of yen relative to Baht Scenario 3: 3% appreciation in the value of yen relative to Baht Q: Determine the probability that the financing cost of issuing yen-denominated notes is higher than the cost of issuing baht-denominated notes As we may note from the above spreadsheet table, under all the three scenarios, the annual ...