# To Call or Not to Call, marketing assignment help

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Application: To Call or Not To Call

Decisions involving capital expenditures often require managers to weigh the costs and benefits of different options related to the financing of a project. For instance, deciding when to call a bond before maturity due to changing interest rates can lower the overall cost of a project significantly through refinancing. So, it is important to be able to understand the real interest rate being paid out to your bondholders (yield) at any given time.

For this Assignment, review the information presented in Problem 7-18 on page 255 of your course text. You will utilize the information in this week's readings and media to make a recommendation with regard to when to call a bond.

• Prepare a spreadsheet using Excel or a similar program in which you compute the items listed in parts a, b, and d. Be sure to compute the Yield-to-Maturity (YTM) and Yield-to-Call (YTC) for each of years 5, 6, 7, 8, and 9.
• Utilizing Word, prepare a written report to your finance director:
• Include a detailed explanation of the conclusion you reached concerning whether or not to call the bond before maturity.
• If your recommendation is to call the bond early, explain when to call the bond and your rationale.

Submit your Assignment (both your Excel and Word files) by Day 7.

General Guidance on Application Length:

Your Assignment, due by Day 7, will typically be 2–3 pages in length as a general expectation/estimate for each bullet point. Refer to the rubric for the Week 3 Assignment for grading elements and criteria. Your Instructor will use the rubric to assess your work.

Xaib
School: UT Austin

let me know if you have any confusion in understanding the answer. I'm always

Data Given in Question
Face Value
\$
Time period (in years)
Annual coupon payment
Current price
\$
Call Price
\$

1,000
10
11%
1,175
1,090

This bond matures in 10 years.
Pmt is the annual coupon payment. This bond pays 11% annually and it has a face value of \$1000. The annu
The bond has a market value of \$1175
The bond has a face value of \$1000
Coupon payments

Part - A

Year
10
9
8
7
6
5

Yield to maturity
8.35%
8.18%
7.96%
7.68%
7.30%
6.76%
Part - B

Year
5
6
7
8
9

Yield to maturity
8.13%
8.39%
8.56%
8.70%
8.80%

Part - C
The bonds are selling at premium which means that interest rates have decreased since the orginal b
rates do not change from the present value, investors would expect to earn YTC
Part - D
Face Value
\$
Time period (in years)
Annual coupon payment

1,000
6
11%

Current price
Year
6
7
8
9

\$

1,175

Yield to maturity
8.27%
8.37%
8.46%
8.53%

According to the above calculations, the latest that investors might expect to call the bond is in the ye

ace value of \$1000. The annual coupon payment is \$110.

creased since the orginal bonds were issued. Assuming these interest
n YTC

to call the bond is in the year 6.

1

Running Head: Report to Kaufman Enterprises’ Finance Director

Report to Kaufman Enterprises’ Finance Director
Student Name:
Course/Number:
Due Date:
Faculty Name:

2

Report to Kaufman Enterprises’ Finance Director
Report to Kaufman Enterprises’ Finance Director
Dear Sir,
According to the statistics, the enterprise has the bond outstanding worth of 1000 face
value and the bond will take 10 years until the maturity. The bonds have an 11% annual coupon
payment, and their current price is \$1,175. We can expect that these dons might be brought in 5
years at 109% of face value which implies that the Call cost will be \$1,090. Premise this data; I
have computed the Yield to maturity and Yield to call for a couple of years, how much amount is
expected in return and the best year when an investor should go for a call.
Initially, I have calculated the Yield to Maturity (YTM) running from 5 to ...

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Anonymous
Solid work, thanks.

Anonymous
The tutor was great. I’m satisfied with the service.

Anonymous
Goes above and beyond expectations !

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