Question
3. (a) Lexington Homes plans to issue $1 million in unsecured, non-callable bond. This debt pays an annual interest payment of $55 and matures 6
3. (a) Lexington Homes plans to issue $1 million in unsecured, non-callable bond. This debt pays an annual interest payment of $55 and matures 6 years from now. The face value is $1,000. Alternatively, it plans to issue $1 million in unsecured, callable bond. All other terms are the same. Which kind of bond is more attractive to investors? Please explain briefly. (b) Green Roof Inns bonds will mature in 9 years and have a coupon rate of 3 percent. If the market rate of interest decreases in the next year, what change are you expecting for the market price and the current yield of the bond?
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