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The Bensington Glass Company

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The Bensington Glass Company entered into a loan agreement with the​ firm’s bank to finance the​ firm’s working capital. The loan called for a floating rate that was 26 basis points ​(0.26 ​percent) over an index based on LIBOR. In​ addition, the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2.23 percent and a minimum of 1.74 percent. Calculate the rate of interest for weeks 2 through 10.   

Date             LIBOR  

Week 1       1.92%

Week 2       1.67%

Week 3        1.49%

Week 4        1.31%

Week 5        1.58%

Week 6        1.59%

Week 7        1.66%

 Week 8       1.93%

 Week 9       1.95%

Calculate the rate of interest for weeks 2-10 (Round to two decimal​ places.)

 
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bonds of Vail Inc.

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The 77​-year $1,000 par bonds of Vail Inc. pay 13 percent interest. The​ market’s required yield to maturity on a​ comparable-risk bond is 9 percent. The current market price for the bond is $1,130.

a. Determine the yield to maturity.

b. What is the value of the bonds to you given the yield to maturity on a​ comparable-risk bond?

c. Should you purchase the bond at the current market​ price?

 
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bonds of Vail Inc

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The 8​-year ​$1,000 par bonds of Vail Inc. pay 11 percent interest. The​ market’s required yield to maturity on a​ comparable-risk bond is 8 percent. The current market price for the bond is $1,110.

a.  Determine the yield to maturity.

b.  What is the value of the bonds to you given the yield to maturity on a​ comparable-risk bond?

c.  Should you purchase the bond at the current market​ price?

 
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Pybus

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Pybus, Inc. is considering issuing bonds that will mature in 22 years with an annual coupon rate of 7 percent. Their par value will be ​$1000, and the interest will be paid semiannually. Pybus is hoping to get an AA rating on its bonds​ and, if it​ does, the yield to maturity on similar AA bonds is 11.5 percent. However, Pybus is not sure whether the new bonds will receive an AA rating. If they receive an A​ rating, the yield to maturity on similar A bonds is 12.5 percent. What will be the price of these bonds if they receive either an A or a AA​ rating?

 
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