Bonds Essays and Research Papers

Instructions for Bonds College Essay Examples

Title: Bonds or Preferred Stocks

  • Total Pages: 1
  • Words: 371
  • References:0
  • Citation Style: APA
  • Document Type: Essay
Essay Instructions: Analyze a company's bond and preferred stock offerings and calculate the values. In your post discuss which purchase you would make (bonds or preferred stock) and why.

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Title: bond valuation

  • Total Pages: 2
  • Words: 779
  • Works Cited:4
  • Citation Style: MLA
  • Document Type: Research Paper
Essay Instructions: Assuming interest rates are 5% for AAA Rated Corporate bonds; calculate the value of your bond relative to this interest rate using equation 11.2 in the text. Assume that i = 5%. Is your bond selling for a premium or at a discount based on your calculation? What other factors can impact bond valuation? Chapter 11

two references
Gitman, L. J., Joehnk, M. D.. & Smart, S. B. (2011). Fundamentals of investing (11th ed.). Boston, MA: Pearson.

Assume that someone asks you for some advice on investing in bonds. You are fully aware of the five risk categories explained in Chapter 10. Assume that the person asking for advice would like to know your opinion on which risk is the one in which to be most cautious. Which risk is it and why? Furthermore, explain how an investor could potentially mitigate his risk. Support your position with examples from the text and this week's additional resources.

Two references
Gitman, L. J., Joehnk, M. D.. & Smart, S. B. (2011). Fundamentals of investing (11th ed.). Boston, MA: Pearson.

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Title: Your task module apply concept present chosen SLP company Suppose company selling a bond pay 1000 year today Keep mind company financial difficulties year full 1000 back Given a dollar year worth a dollar today pay a full 1000 bond

  • Total Pages: 2
  • Words: 455
  • Bibliography:3
  • Citation Style: APA
  • Document Type: Essay
Essay Instructions: Your task for this module is to apply the concept of present value to your chosen SLP company. Suppose your company is selling a bond that will pay you $1000 in one year from today. Keep in mind that if your company has financial difficulties in one year you might not get your full $1000 back. Given that a dollar one year from now is always worth less than a dollar today, you most certainly would not pay a full $1000 for this bond.

If you are highly risk averse or strongly prefer having money today to having money tomorrow, then you would pay significantly less than $1000 for this bond. Higher inflation or high interest rates would also lead you to pay less for the bond. Also, the greater the chance of bankrupty of your company the less you should be willing to pay for the bond.

Given the concepts of the time value of money, answer the following questions in a two to three page paper:

1. How much would you pay for this bond today? Take into consideration your own personal risk preferences, interest rates, inflation, and the probability your company will not be able to pay you back in one year. Note: no need for any math equations for this part. Just explain how much you would personally pay for a $1000 bond from this company.

2. Based on your answer to the previous question, what would be your discount rate for this bond? Use the present value formulas from the background materials and show your work.

3. Pick two other companies in the same industry as your SLP company. One should be one that you would pay less for a $1000 bond than you would from your SLP company and another one that you would pay more for a $1000 bond from your SLP company. Explain why you would pay more or less for their bonds.

Session Long Project Expectations

This paper will be graded with the following criteria in mind:

A. Provide a direct answer to all three assignment questions, focus only on these three questions.

B. Reference all of your sources of information, both within the text as well as with a bibliography at the end.

C. For all calculations, show all of your work and demonstrate that you understand the steps.

D. Your paper should be two to three pages in length.

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Title: Finance Question 1.a) Bond ratings encompass a

  • Total Pages: 4
  • Words: 1218
  • Sources:2
  • Citation Style: MLA
  • Document Type: Research Paper
Essay Instructions: Please answer the below finance questions.
Please note use the textbook ( Ross, SA, Westerfield, RW & Jaffe, JF 2010, Corporate finance , 9th edition, McGraw-Hill/Irwin) or previous editions for your reference. Also finance formulas to be either shown in arithmetic or annuity table formats.

Question One:
Globally, the bond market serves as the primary channel for debt funding of large corporations and government
bodies.
TerraVerdi (TV) is a plastics company that diversified, more than a decade ago, into the manufacture of artificial grasses and lawns. These products are manufactured from recycled plastics.
During this time, the company grew rapidly and has gained international prominence in its field. TV grew from its origins in Italy to having subsidiary operations in ten other countries and agents representing the company in a further 27 countries.
The company was family owned during the above period and the firm relied, for much of its finance, on support from the company?s bankers, Banco Blanco. Accordingly, the firm?s founders have a strong sense of loyalty to the bank. At present, the bank loans total ?1.1 billion principal and have an average interest rate of 8.5% p.a. and average maturity of 5 years.

However, the company listed on the stock exchange two years ago and the new CEO ? who is very profit-oriented ? intends to propose to the board that the company should issue bonds to replace the bank loans. Accordingly, the CEO has requested that you write a few brief points that he should take to the board in support of his proposal.
Required:
a) Explain briefly why the company would most likely need a bond rating and what it would have to do to get that
rating. (a few paragraphs)
b) Assume Principe Investment Bankers (PIB) have expressed the opinion that TV would most probably be able to obtain an A- rating on the assumption that they were to issue no more than ?1 billion of debt. An extract from the current AAA yield curve is as follows:
1 Year = 6%, 2 years = 6.5%, 5 years = 7.0% & 10 years = 8%

On the basis that A- yields differ by about 1% p.a. from AAA yields, show approximately the amount of the annual interest-saving benefits (in Euros, ?), other things being equal, by replacing the term loans with bonds. (A simplified, arithmetic computation will suffice)

c) If all issue costs total ?20 million for a ?1 billion par issue (at the relevant yield you determined in part (b)), what effect would this have on your answer in (b)? (Assume coupons are paid half-yearly)

Question Two: (50 marks)
Adlcorp Limited Steel Division is considering a proposal to purchase a new machine to manufacture a new product. The new machine will cost $1 million. The machine has an estimated life of three years for accounting and taxation purposes. Estimated salvage value at the end of three years is $100,000 in today?s dollars. The tax rate is 30 percent and is payable in the year in which profit is earned. An investment allowance of twenty percent
is available.
The purchase can be fully financed by debt, which is available at the firm?s normal rate of 10 percent. One hundred percent financing is available with principal and interest payments at the end of each year for three years of $402,115. The firm does not intend to change its target debt/equity ratio.
Projects of this type and risk normally have a nominal cost of capital of 12.27 percent and a real cost of capital of 9 percent for the time horizon involved. The Steel Division normally uses a weighted average cost of capital of 13.3 percent (including inflation).
Addition net working capital of $60,000 is required immediately to support the project. Assume that this amount (in today?s dollars) is recovered at the end of three years.
The new product will absorb $50,000 of allocated head office administration costs each year. This is in accordance with the firm?s policy of allocating all corporate overhead costs to divisions. Extra marketing and administration expenditure of $40,000 per year will be incurred ($40,000 for year one increasing by the inflation rate of three percent per annum).
An amount of $30,000 has been spent on a pilot study and market research for the new product. The figures provided above are based on this work.
Projected sales for the new product are 30,000 units at $110 per unit for year one. Units sold will rise at the rate of 3,000 per year over the next two years. Cash expenses are estimated to be 80 precent of sales. Prices determining revenue and expenditure will increase at the inflation rate of 3% pa.
Except for initial outlays, assume cash flows occur at the end of each year (unless otherwise stated).

Required:
a) Calculate the NPV. Is the project acceptable? (Assume prime cost depreciation for tax purposes).

b) Explain your calculation of relevant cash flows, justifying your calculations and approach.

c) Defend your choice of discount rate.

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