1)IBM has just issued a callable (at par) 5 year, [8] % coupon bond with quarterly...

Question

Question

1)IBM has just issued a callable (at par) 5 year, [8] % coupon bond with quarterly coupon

payments. The bond can be called at par in two years or anytime thereafter on a coupon

payment date. It has a price of $[103] per $100 face value. What is the bond's yield to

call?

2) Suppose you borrow $[12,500] when financing a gym valued at

$[25,500]. Assume that the unlevered cost of the gym is [10]% and that the

cost of debt is valued at [10]%. What should be the cost of equity of your firm?

NOTE: Answer in percentage. If your answer is 0.0405, then answer 4.05.

Answer 1

Answer #1

Answer 2

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