Homework Answers
Coupon dollars (I) = par value * coupon rate = $1000 * 8% = $80.
FC = 2% of par value = 2% of $1000 = $20.
Term (n) = 10
Price (P) = $980
Net Proceeds = P - FC = $980 - $20 = $960.
rd is calculated using RATE function in Excel :
nper = 10 (years to maturity)
pmt = 80 (annual coupon payment)
pv = -960 (Net proceeds)
fv = 1000 (face value receivable at maturity)
RATE is calculated to be 8.61%.
rd = 8.61%
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Click to see additional instructions A 10-year $1,000 bond sells for $980, and the flotation costs are 2 % of the p...
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Click to see additional instructions A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par value. The coupon rate is 8%. Put in the values of the variables and calculate the before-tax cost of capital from this bond? Coupon dollars (1) = Flotation costs in dollars (FC) = term (n) = O Price (P) - Net proceeds (N_p) =
A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par...
A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par value. The coupon rate is 8%. Put in the values of the variables and calculate the before-tax cost of capital from this bond? Coupon dollars (I) = Flotation costs in dollars (FC) = term (n) = Price (P) = Net proceeds (N_p) = rd = %
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