Proctor and Gamble's total amount of debt increased from 31.9% in March 2011 to 34.2% in December 2011, mainly due to its net debt issuances to fund general corporate purposes. What was the annual cost of the funds raised from the $1.0 billion bonds that mature in 2014 to P&G? If the bond sold at $100.10 at the time of issue, investors' required annual yield would be Looking at the comparable U.S. Treasury yield, these bonds were issued at a spread of Because the coupon rate is basis points. the yield required by the market, the bond sold at If the new observed yield of the bond is 1.2 % , the bond is likely to be trading at a price of $ places.) basis points. at the time of issue. (Note: Round your answer to two decimal As interest rates increase, the yield required by the market will increase, and the price of the bond is likely to increases to 1.2%, the bond's price by If the current yield is higher than the coupon rate, investors would want a higher return on their investment. If the coupon rate is less than the yield required by the market, the price of the bond is most likely to be the par value of the bond, and the bond will sell at %. (Note: Round your answer to two decimal places.) Thus, when the yield
Proctor and Gamble's total amount of debt increased from 31.9% in March 2011 to 34.2% in December 2011, mainly due to its net debt issuances to fund general corporate purposes. What was the annual cost of the funds raised from the $1.0 billion bonds that mature in 2014 to P&G? If the bond sold at $100.10 at the time of issue, investors' required annual yield would be Looking at the comparable U.S. Treasury yield, these bonds were issued at a spread of Because the coupon rate is basis points. the yield required by the market, the bond sold at If the new observed yield of the bond is 1.2 % , the bond is likely to be trading at a price of $ places.) basis points. at the time of issue. (Note: Round your answer to two decimal As interest rates increase, the yield required by the market will increase, and the price of the bond is likely to increases to 1.2%, the bond's price by If the current yield is higher than the coupon rate, investors would want a higher return on their investment. If the coupon rate is less than the yield required by the market, the price of the bond is most likely to be the par value of the bond, and the bond will sell at %. (Note: Round your answer to two decimal places.) Thus, when the yield
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider the following case of investment-grade bonds issued by Procter & Gamble Co. (P&G) in August 2011.
Proctor & Gamble (NYSE: PG) |
Issue Size ($Mil.)
$1,000
Coupon
0.700%
Rate (%)
1.0
0
July
2011
Aug.
Issue Details
Maturity Date
08/15/2014
Coupon Type
mi
0.19%
Fixed
Sept.
0.79%
Historical Treasury Rates
Oct.
Callable
Yes
Coupon Frequency
Time Period
Semi-annually
Nov.
2 Year Nominal
5 Year Nominal
Difference
Dec.
Jan.
2012
Transcribed Image Text:Proctor and Gamble's total amount of debt increased from 31.9% in March 2011 to 34.2% in December 2011, mainly due to its net debt issuances to
fund general corporate purposes.
What was the annual cost of the funds raised from the $1.0 billion bonds that mature in 2014 to P&G?
If the bond sold at $100.10 at the time of issue, investors' required annual yield would be
Looking at the comparable U.S. Treasury yield, these bonds were issued at a spread of
Because the coupon rate is
basis points.
the yield required by the market, the bond sold at
If the new observed yield of the bond is 1.2%, the bond is likely to be trading at a price of $
places.)
basis points.
at the time of issue.
(Note: Round your answer to two decimal
As interest rates increase, the yield required by the market will increase, and the price of the bond is likely to
increases to 1.2%, the bond's price
by
If the current yield is higher than the coupon rate, investors would want a higher return on their investment. If the coupon rate is less than the yield
required by the market, the price of the bond is most likely to be
the par value of the bond, and the bond will sell at
%. (Note: Round your answer to two decimal places.)
. Thus, when the yield
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