BKB CO 12/12

Q1: The total nominal value of the bonds is $20M. So the number of $100 bonds is 20M/100 = 200,000. The total market value of the bonds is $21M, and therefore the MV of each bond = $21M / 200,000 = $105 (which is the same as the examiners answer). Q2: There are 10M preference shares. The total MV is $6.25M and therefore the market value per share is $0.625. The dividend per share is 5c and therefore the cost of preference shares = 0.05/0.625 = 8%

Thanks for the comment :-)

Hi i want to ask about the market value for bonds. should it be like this (total nominal value/ nominal value per share price x market value) but the answer is like this 21/20x100 . It should be multiply by 21 right because that is the market value. I dont understand

It makes no difference whether you calculate it the way you have written or whether you do what I have written in my previous reply to Q1. $21M is the total market value of all the bonds, and the total nominal value is $20M. The nominal value of each bond is $100. Have you watched my free lectures on this?