Lyon Case Essay

Question one particular:

Lynos Record Storage's control, Eric Petro, told Rene that the you possess were granted in 1999 for cheap and that simply approximately $9. 1 mil was received in money. Explain precisely what is meant by the terms " premium” or " discount” as they relate to bonds. Compute exactly how much the company received from the 8% provides if the rate prevailing in the time the original issue was 9% as mentioned in Exhibit 2 . As well, re-compute the amounts proven in the "balance sheet" at January 31, 06\, and 12 , 31, 3 years ago, for Long-Term Debt. What is the current market value of the provides outstanding with the current successful interest rate of 6%? Remedy:

Premium Relationship:

A relationship is a high quality bond in the event its cost is greater than it is par value. Alternatively, we are able to say that a bond can be premium bond if their coupon rate is higher than the yield to maturity.

Discount Bond:

A bond is a discount relationship if their price is below its doble value. Alternatively, we can say that a relationship is price cut bond in the event that its promotion rate is less than the yield to maturity. Compute just how much the company received from its 8% bonds in the event the rate applicable at the time of the original issue was 9% as indicated in Exhibit installment payments on your Face Value = $ 1000000

Voucher Rate = 8%

YTM = 9%

Number of years sama dengan 20

Regularity = a couple of (semi-annual)

Volume received = $ 9079920. 779 (The calculations happen to be shown in the excel sheet)

Also, re-compute the sums shown in the balance sheet by December thirty-one, 2006, and December 31, 2007, for Long-Term Personal debt. | 2006| 2007

YTM = six %| 11741314. 77| 11644360. 84

YTM = on the lookout for %| 9258589. 552| 9292611. 255

(The calculations are shown inside the excel sheet)

What is the existing market value with the bonds exceptional at the current effective rate of interest of 6%? Face Benefit = bucks 1000000

Promotion Rate sama dengan 8%

YTM = 6%

Frequency = 2 (semi-annual)

Current market worth = dollar 11541502. 41 (The measurements are displayed in the exceed sheet)


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