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Essay / Research Paper Abstract
This 3 page paper considers a case provided by the student. The paper looks at how a bond rating may be given, the way the yield to maturity on a bond may be calculated and the way interest payable may be calculated. The bibliography cites 1 source.
Page Count:
3 pages (~225 words per page)
File: TS14_TEleland.rtf
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Unformatted sample text from the term paper:
be present. Looking at the other companies, there is a pattern, there is higher risk the higher the debt ands also other factor, low return on equity will increase risk,
as will low interest rate coverage, low current ratio. Looking at the companies in the case study Leland appears to be safer than some, with a lower debt ratio, the
return on equality is good and there is a high interest rate coverage. This company is in a similar position to Nolan Bread which is an A2, as such the
student may like to argue that Leland should be in the region of A2. Question 2 To calculate the yield to maturity we take all the returns form the
bonds over their life as well as any capital gain. International Bakeries Gates Bakeries Savannah products Purchase price 1,100 920 1,150 Par value 1,000 1,000 1,000 Interest rate 10.35%
9.45% 15.75% Interest for 1 years 103.5 94.5 157.5 Term 25 20 15 Over term of bond 2587.5 1890 2362.5 Capital Gain/Loss -100 80 -150 Total Yield 2487.5 1970 2212.5
However we can also argue that although these are the full yields they should also be considered with reference to their terms. Question 3 International Bakeries
Gates Bakeries Savannah products Purchase price 1,000 1,000 1,000 Interest payable 2588 1890 2363 Tax relief at 35% 905.63 661.50 826.88 net amount 1,681.875 1,228.500 1,535.625 Term 25 20 15
amount per annum 67.275 61.425 102.375 As a percentage 6.73 6.14 10.24 Question 4 If 5% of all bonds are retied each year, assuming that this means 5%
of the outstanding bonds Amount (in millions) Year 1 20.00 Amount outstanding year 2 19.00 Amount outstanding year 3 18.05 Interest payable at year 3 1.805 However, the
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