Question: 1. Compute the yield to maturity (YTM) for each of the Microsoft notes. To check your methodology, note that the YTM for the 0.875% notes maturing in 2013 is 0.931%.
2. Compute the YTMs for Coca Cola Enterprises notes.
3. Compute the YTM for the Norfolk Southern bonds.
4. Compute the YTM for Cephalon bonds.
5. How would you explain the differences in the yields across issuers and maturities?
6. For Cephalon's convertible bonds draw a "payoff diagram." That is, graph the value of a single $1000 note on May 1, 2014, as a function of Cephalon's stock price on the same day, assuming that the note has not been converted by then. How does the ownership position of a convertible bond holder differ from that of a conventional bond holder or a common shareholder?
7. Why has each company decided to raise capital in the particular way it has? From the issuer's perspective, what are the important features and terms of each issue? What are the risks?