Corporate Bonds

Posts Tagged ‘investment’

Question: please please please?

FINANCIAL PLANNING john has $20,000 to invest.As his financial consultant ,you recommend that he invest in Treasury bills that yield 5% , Treasury bonds that yield 7% and Corporate Bonds that yield 9% . John wants to have an annual income of $1280 and the a,mount invested in Treasury bills must be two times the amount invested in Corporate Bonds.Find the amount in each investment.

Answer: This requires a lot of trial and error or you could set up an equation like a+b+c=20000
and since a+b+2a=20000. You have to continue on like that and the problem should get simpler. G'Luck

Stock Investment Tips : How to Invest in a Corporate Bond

Question: you have been asked by a corporation to evaluate its capital structure?

It currently has 70 million shares outstanding, trading at $10 per share. In addition, it has 500000 Convertible Bonds, wit a coupon rate of 8%, trading at $1000 per bond. Corp is rated BBB, and the interest rate on BBB straight bonds is currently 10%. The beta for the company is 1.2, and the current risk-free rate is 6%. the tax rate is 40%.

Answer: You're asking us to do an aweful lot of work for you here.

Why don't you break this up into individual questions for us?

(For the WACC question, I'm going to do you a favor and tell you to work this out yourself with the proper equation. This is not something you just see and learn and move on, you have to excercise the formula to learn and remember it and see how it works. You have to be able to visualize the fact that interest is deductible so you can make fast, sharp decisions. We're not helping you by just giving you the answer.)

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