Question
A company issued 10-year bonds 5 years ago with a face value of $1,000 and an annual coupon rate of 6%. The coupons are paid
A company issued 10-year bonds 5 years ago with a face value of $1,000 and an annual coupon rate of 6%. The coupons are paid semi-annually and the bonds are currently trading in the market at a price of $1,089.83. The company is considering whether to call the bonds and issue new 5- year bonds at a par value of $1,000. What is the yield to maturity on the currently outstanding bonds with a remaining time to maturity of 5 years? What is the annual coupon rate the company would pay on the newly issued bond? Should company call the bond and refinance?
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