Question
1. Thirty-year B-rated bonds of Parker Optical Company were initially issued at a 12 percent yield. After 15 years, the bonds have been upgraded to
1. Thirty-year B-rated bonds of Parker Optical Company were initially issued at a 12 percent yield. After 15 years, the bonds have been upgraded to Aa2. Such bonds are currently yielding 16 percent to maturity.Use Table 16-2. |
Determine the price of the bonds with 15 years remaining to maturity. |
2.
Cox Media Corporation pays a coupon rate of 9 percent on debentures that are due in 15 years. The current yield to maturity on bonds of similar risk is 6 percent. The bonds are currently callable at $1,120. The theoretical value of the bonds will be equal to the present value of the expected cash flow from the bonds. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. |
a. | Find the market value of the bonds using semiannual analysis. (Ignore the call price in your answer. Do not round intermediate calculations and round your answer to 2 decimal places.)
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