Question
A bond has the following features: Coupon rate of interest (paid annually): 13 percent Principal: $1,000 Term to maturity: 9 years a) What will the
A bond has the following features: Coupon rate of interest (paid annually): 13 percent Principal: $1,000 Term to maturity: 9 years
a) What will the holder receive when the bond matures? _____ (Principal / All coupon payments) b) If the current rate of interest on comparable debt is 9 percent, what should be the price of this bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $_____ Would you expect the firm to call this bond? Why? ____ (Yes / No), since the bond is selling for a _____ (discount / premium). c) If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for nine years if the funds earn 9 percent annually and there is $120 million outstanding? Use Appendix C to answer the question. Round your answer to the nearest dollar. $ _________
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