20 Other thip held kam, which ofthe Mowing atins wold sheet? a. The company purc
ID: 2809074 • Letter: 2
Question
20 Other thip held kam, which ofthe Mowing atins wold sheet? a. The company purchases a w piece of epuipment c. The company pays a dividend d. The company issues new common stock e. The company gives customers more time to pay their bills 21. Field Industries outstanding bonds have a 25-year maturity and $1,000 par value. Their nominall yield to maburity is interest semiannually, and they sell at a price of S850 What is the bond's nominal Cannual) couporn interest rate? 6,27% b. 6.60% c. 6.95% d. 7.32% e. 7.70% 2 Meacham Enterprises' bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual corut nd have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yisld.te.sallcc? a, 6.39% b. 6.72% . 708% d. 7.45% e. 7.82% Vhich one of the following corporate board characteristics usually improves corporate governance? . The board has a majority of outsiders who have experience and aren't too busy CEO is the chairman of the board. The board is as large as is possible Board members are paid at a rate higher than their peers and their payment is mostly cash. The board has a majority of insiders from company management on it who bring first-hand knowledgeo e company operatesExplanation / Answer
1)
d. the company issues new common stock
Issuing of new common stock will increase the cash balance of the company as it will bring cash from investors.
2)
e. 7.70%
6 month Coupon payment using a financial calculator = 38.5
Yearly coupon = 38.5 * 2 = 77
Annual coupon payment = ( 77 / 1000) * 100 = 7.7%
Keys to use ina a financial calculator: PV -850 FV, 1000, N 50, I/Y 9.25, CPT PMT
3)
d. 7.45%
Keys to use in a financial calculator: PV -1280, FV 1050, N 5, PMT 135, CPT I/Y
4)
e. The board has a majority of insiders from company management on it who bring first hand knowledge
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