12. Tom Cruise Lines, Inc., issued bonds five years ago at $1,000 per bond. These bonds had...

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12. Tom Cruise Lines, Inc., issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 12 percent. This return was in line with the required returns by bondholders at that point as described below:

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Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity.
Compute the new price of the bond.

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Foundations Of Financial Management

ISBN: 9780073382388

13th Edition

Authors: Stanley B. Block, Geoffrey A. Hirt, Bartley R. Danielsen

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