Questions from Financial Management

Q: A sinking fund can be set up in one of two ways

A sinking fund can be set up in one of two ways. Discuss the advantages and disadvantages of each procedure from the viewpoint of both the firm and its bondholders.

Q: a. Bond; Treasury bond; corporate bond; municipal bond

a. Bond; Treasury bond; corporate bond; municipal bond; foreign bond b. Par value; maturity date; coupon payment; coupon interest rate c. Floating-rate bond; zero coupon bond; original issue discoun...

Q: The rate of return on a bond held to its maturity date

The rate of return on a bond held to its maturity date is called the bond’s yield to maturity. If interest rates in the economy rise after a bond has been issued, what will happen to the bond’s price...

Q: If you buy a callable bond and interest rates decline, will

If you buy a callable bond and interest rates decline, will the value of your bond rise by as much as it would have risen if the bond had not been callable? Explain.

Q: Wilson Wonders’ bonds have 12 years remaining to maturity. Interest is

Wilson Wonders’ bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is...

Q: Should firms require higher rates of return on foreign projects than on

Should firms require higher rates of return on foreign projects than on identical projects located at home? Explain.

Q: Seven years ago, Goodwynn & Wolf Incorporated sold a 20-

Seven years ago, Goodwynn & Wolf Incorporated sold a 20-year bond issue with a 14% annual coupon rate and a 9% call premium. Today, G&W called the bonds. The bonds originally were sold at their face v...

Q: “Short-term interest rates are more volatile than long-

“Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices.” Is this statement tru...

Q: Suppose you and most other investors expect the inflation rate to be

Suppose you and most other investors expect the inflation rate to be 7% next year, to fall to 5% during the following year, and then to remain at a rate of 3% thereafter. Assume that the real risk-fre...

Q: Jackson Corporation’s bonds have 12 years remaining to maturity. Interest is

Jackson Corporation’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of...