TCOs 1, 5, 6) Calculate the appropriate selling price of a 30-year 5% coupon, $1,000 corporate bond that was purchased five years ago. Marketplace interest rates are averaging 8%. ,,,(TCO 9) As percentage of equity on the balance sheet increases, financial leverage decreases, which makes EPS decrease. If this is the case, why don’t all firms try to end up with 99.9% debt? ,, (TCO 6) A $1,000 face value bond was issued at par 20 years ago with a 6% coupon paid semiannually. The bond now has nine years remaining to maturity and similar debt obligations are yielding 12%. ,Compute the current price of the bond. ,Assuming that the bond is sold at its current price, what is the capital gain or loss from the original purchase? ,Now assume that the price of the bond returns to par. What is the percentage capital gain or loss for the new owner? ,Please explain why the percentage gain is different from the percentage loss.,,
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