Question
BOND VALUATION - Ch 6 and pages OM 11-14: In 2013 Carnival Cruise Lines decided to sell some new bonds (something about fixing a big
BOND VALUATION - Ch 6 and pages OM 11-14: In 2013 Carnival Cruise Lines decided to sell some new bonds (something about fixing a big ship). They sold the bonds for $1,000 (face value) with a 20 year maturity and an 8% coupon. Two years have passed. Interest rates on similar bonds have declined to 5%. If an owner attempts to sell her/his Carnival bond bought for $1,000 in 2013, what should they expect to receive for it in the secondary market?
- They will sell if for approximately $1,351, at a discount.
- They will sell if for approximately $351, at a discount.
- They will sell if for approximately $1,351, at a premium.
- They will sell if for approximately $351, at a premium.
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