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Assignment:

Essay: Debt securities and interest rates

Identify at least three different categories of debt instruments, and compare and contrast them in terms of risk as well as potential for return.

The overall interest rate of a debt security consists of a number of different components. Identify each of the components, describe each, and explain why they form a part of the overall interest rate profile of the security.

Summarize your findings in a two to three page paper.

Problem: Capital Structure and the WACC

Percent Debt (%)

After Tax Debt Cost (%)

Cost of equity (%)

0

—–

14

15

5

18

45

9

22

67

12

25

78

16

30

Determine the WACC for each scenario

Determine the optimal mix of debt and equity.

Present your findings in a spreadsheet, and provide the rationale for your answers.