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Foundations Financial Management
Use Table 16-3 to answer the following questions. Table 16-3

Use Table 16-3 to answer the following questions. Table 16-3 a. Why would the TransCanada Pipeline 4.55

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Use Table 16-3 to answer the following questions.

Table 16-3

Coupon Maturity Date Yield to Maturity Rating/Issuer Price AAA Government of Canada 4.25 June 1, 2018 110.74 1.42 Govern

a. Why would the TransCanada Pipeline 4.55 percent bond have a higher yield to maturity than the Trans Alta 5.00 percent bond?
b. What do you suggest is the spread above Government of Canada bonds for a short-term (2020) bond of TransAlta at 5 percent. Why the difference?

Transcribed Image Text:

Coupon Maturity Date Yield to Maturity Rating/Issuer Price AAA Government of Canada 4.25 June 1, 2018 110.74 1.42 Government of Canada 3.50 June 1, 2020 110.02 1.71 Government of Canada 8.00 June 1, 2027 161.84 2.40 AA NAV Canada 1.949 Apr. 19, 2018 100.06 1.93 A TransCanada Pipeline 8.29 Feb. 5, 2026 144.02 3.61 TransCanada Pipeline Nov. 15, 2041 106.73 4.14 4.55 BBB TransAlta 5.00 Nov. 25, 2020 106.42 3.86 TransAlta 6.90 Nov. 15, 2030 6.19 107.26 BB 7.35 Bombardier Dec. 22, 2026 108.00 6.41

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a The TransCanada Pipeline bond is rated higher at A than the TransAlta bond ...View the full answer

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Foundations of Financial Management

ISBN: 978-1259024979

10th Canadian edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

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Question Posted: Sep 17, 2018 12:27 PM

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