Chapter 4: Problems
4-3 A $ 1,000 par value bond makes two interest payments each year of $ 45 each. What is the bonds coupon rate? 9% = 45(2)/1,000
4-12 Bennifer Jewelers recently issued ten- year bonds that make annual inter-est payments of $ 50. Suppose you purchased one of these bonds at par value when it was issued. Right away, market interest rates jumped, and the YTM on your bond rose to 6 percent. What happened to the price of your bond? the price fell by $73.60.
Chapter 5: Problems
5-1 The equity section of the balance sheet for Hilton Web- Cams looks like this: Common stock, $ 0.25 par $ 400,000
Paid- in capital in excess of par $ 4,500,000
Retained earnings $ 1,100,000
a. How many shares has the company issued?
400,000/0.25 = 1.6 million shares
b. What is the book value per share?
(400,000+4,500,000+1,100,000)/1.6 million shares = $3.75 per share c. Suppose that Hilton Web- Cams has made only one offering of common stock. At what price did it sell shares to the market? (4,500,000+400,000)/1.6 million shares = $3.0625
5-3 Owners of the Internet bargain site FROOGLE. com have decided to take their company public by conducting an initial public offering of common stock. They have agreed with their investment banker to sell 3.3 million shares to investors at an offer price of $ 14 per share. The underwriting spread is 7 percent. a. What is the net price that FROOGLE .com will receive for its shares? 0.93 $14 = $13.02
b. How much money will FROOGLE. com raise in the offering? $13.02 3.3 million = $42,966,000
c. How much do FROOGLE. coms investment bankers make on this transaction? ($14 - $13.02) 3.3 million = $3,234,000
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