Consolidated Insurance Wants to Raise $35 Million in Order to Build

question 83

Multiple Choice

Consolidated Insurance wants to raise $35 million in order to build a new headquarters.The company will fund this by issuing 10-year bonds with a face value of $1,000 and a coupon rating of 6.5%,paid semiannually.The above table shows the yield to maturity for similar 10-year corporate bonds of different ratings.Which of the following is closest to how many more bonds Consolidated Insurance would have to sell to raise this money if their bonds received an A rating rather than an AA rating?

• A)686
• B)750
• C)765
• D)1156

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Definitions:

Horizontal Analysis

A financial analysis technique that examines the changes in the amounts of specific financial statement items over a period of time.

Base Year Figure

A reference point in time used for comparison in financial and economic analysis to track changes and trends.

Common-sized Income Statement

An income statement in which each line item is expressed as a percentage of sales revenue, facilitating comparison across periods and companies.

Common-sized Balance Sheet

A financial statement in which each line item is expressed as a percentage of total assets, facilitating comparison across firms and time periods.