Riordan Inc. offers a 7 percent coupon bond that has a $1,000 par value, semiannual coupon payments
Fantastic news! We've Found the answer you've been seeking!
Question:
Riordan Inc. offers a 7 percent coupon bond that has a $1,000 par value, semiannual coupon payments and a yield to maturity of 7.73%. The bond matures in 9 years. What is the price of the bond?
Transcribed Image Text:
Sumitomo-Mitsui Bank (the Bank) was found not to have not breached its duty of explanation when an interest-rate swap agreement was executed between the Bank and a customer (the Company), under which fixed and floating interest rates would be swapped and the resulting difference settled [see Exhibit 1]. BACKGROUND The Company was a corporation that managed pachinko parlors. On December 30, 2003, the Company borrowed 1.5 billion from the Bank, which was the Company's main financial institution. The loan was made under the condition that a variable-rate interest of 0.75% per annum would be added to the Tokyo Interbank Offering Rate (TIBOR). When the loan was made, Mr. Arai, a Bank employee, knew that the Company had often borrowed from other banks under variable-rate-interest conditions. Mr. Arai suggested the transaction in question as an instrument to hedge against risk associated with rising interest rates. The transaction in question was an interest-rate swap agreement. That is, based on an agreement between the concerned parties, a certain notional principal and a transaction period were set and fixed, variable interest rates swapped in the same currency, and the resulting difference settled. This was a simple "plain vanilla interest-rate swap interest-rate swap" deal. Such a swap could be further categorized as either a spot-start swap under which transactions commenced simultaneously with the execution of the agreement, or a forward-start swap, under which transactions commenced after a certain period following the execution of the agreement had elapsed. Sumitomo-Mitsui Bank (the Bank) was found not to have not breached its duty of explanation when an interest-rate swap agreement was executed between the Bank and a customer (the Company), under which fixed and floating interest rates would be swapped and the resulting difference settled [see Exhibit 1]. BACKGROUND The Company was a corporation that managed pachinko parlors. On December 30, 2003, the Company borrowed 1.5 billion from the Bank, which was the Company's main financial institution. The loan was made under the condition that a variable-rate interest of 0.75% per annum would be added to the Tokyo Interbank Offering Rate (TIBOR). When the loan was made, Mr. Arai, a Bank employee, knew that the Company had often borrowed from other banks under variable-rate-interest conditions. Mr. Arai suggested the transaction in question as an instrument to hedge against risk associated with rising interest rates. The transaction in question was an interest-rate swap agreement. That is, based on an agreement between the concerned parties, a certain notional principal and a transaction period were set and fixed, variable interest rates swapped in the same currency, and the resulting difference settled. This was a simple "plain vanilla interest-rate swap interest-rate swap" deal. Such a swap could be further categorized as either a spot-start swap under which transactions commenced simultaneously with the execution of the agreement, or a forward-start swap, under which transactions commenced after a certain period following the execution of the agreement had elapsed.
Expert Answer:
Answer rating: 100% (QA)
First we need to calculate the semiannual coupon payment Coupon ... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
On January 1, 2017, Four Brothers Manufacturing borrowed $10 million from Guiffrie Bank by signing a three-year, 8.0% fixed-rate note. The note calls for interest to be paid annually on December 31....
-
A bond speculator currently has positions in two separate corporate bond portfolios: a long holding in Portfolio 1 and a short holding in Portfolio 2. All the bonds have the same credit quality....
-
We look at the accumulated area beneath this curve, as in the definite integral as follows F(x) = f(t) dt -2 { F(x) = int_(-2)^x f(t) dt a) Use ordinary area formulas to compute each of the...
-
Fill in the missing particles or nuclei; (a) n + 137/56Ba ? + y; (b) n + 137/56Ba 137/55Cs + ?; (c) d + 2/1H 4/2 He + ?; (d) + 197/79Au ? + d where d stands for deuterium.
-
Tickitt & Run are in the process of completing the audit of their client Fredbare Ltd, a manufacturer of swim- wear and sports clothing. They have just carried out the interim audit and have...
-
How can a corporation that has its offices out of state be served?
-
1. Companies are developing ethical policies and guidelines for legal reasons, but also to clarify what is acceptable and what is not. Do you think any of the issues raised in the case required...
-
Help Entering Answers (1 point) Given 7x 4y 3z F(x,y,=)= [ Calculate curl(F) (y/(z^2))-(-32x^2)+k(-7x/y^2) div(F) 7/y-4/2+3/x div(F)
-
Data from the financial statements of Naranjo Co. and Jablonsky, Inc. are presented below (in millions): Naranjo Co. Jablonsky, Inc. Total liabilities, Year $73,044 $54,196 2 Total liabilities, Year...
-
(A) The following is information related to the business of Jasmine Florist Sdn. Bhd. for the year ending 2023. Inventory RM5,000 General and administrative expenses 1,000 Ordinary shares 50,000 Cash...
-
You observe a star and split apart its light to find a continuous spectrum. You observe that the spectra peaks at 1 = 290 nm. Using Wien's Law determine the temperature of that star
-
A manufacturer sells its sole product for $10 per unit, with a unit contribution margin of $6. The fixed manufacturing cost rate per unit is $2 based on a denominator capacity of 1 million units, and...
-
In the 2016 film, The Accountant, Living Robotics (a company that produces prosthetics) has been experiencing rapid growth both in the private sector as well as through government contracts, fitting...
-
What is Moore's law applicable to? What are chips, transistors, volatile vs non-volatile memory
-
Gilbert, Inc. has just paid a dividend of $40.00 per share. You expect the dividends to grow at 15% then 8% for the next two years. Thereafter, you expect the dividend growth to slow to a perpetual...
-
d) For die casting processes: 1. What are the most common metals processed using die casting and discuss why other metals are not commonly die casted? 2. Which die casting machines usually have a...
-
Serges is the owner of a retail meat marketing business. Without authority his managing agent borrowed $3,500 from David on Sergess behalf, for use in Sergess business. Serges paid $200 on the...
-
Discuss which types of restrictive indorsements are effective and ineffective.
-
Discuss the potential civil and criminal liability of an accountant under the 1933 Act.
-
Assume Knowlton Holdings Ltd. completed these long-term non-strategic investment transactions during 2020 : 1. Journalize Knowlton's investment transactions assuming the company reports any changes...
-
Suppose on February 1, 2020, General Motors paid \(\$ 41\) million for a \(40 \%\) investment in ABC Ltd., an auto parts manufacturer. Assume \(A B C\) earned net income of \(\$ 6\) million and paid...
-
Return to exercise SB-7, the Prudential Bache (PB) investment in CitiCorp bonds. Journalize the following on PB's books: a. Purchase of the bond investment on January 2, 2020. PB expects to hold the...
Study smarter with the SolutionInn App