Disney debt was rated Double-A (similar to that of McDonald’s, the hamburger chain). McDonald’s had recently issued 40-year bonds at 75 basis points (0.75%) above the 30-year Treasury bond yield. The 30-year Treasury bond yield was approximately 6.6% on July 21, 1993. On that date, the Disney bonds were priced to sell at par with a coupon rate of 7.55%. Overview: The purpose of this case is to examine the economics and mechanics underlying long-term debt. Specifically you will:

-Apply the present value concept

-Discuss the risks in investing in fixed rate long-term securities

1. For Disney’s 100-year $300 million bonds, calculate the present value of the semi-annual coupon payment stream on the day of issuance (at par). Please provide the input you use to the PV calculator (payment, FV, N, i). Four items. Please provide all four inputs and then the answer.

2. For Disney’s 100-year $300 million bonds, calculate the present value of the principle payment on the day of issuance (at par).

Please provide the input you use to the PV calculator (payment, FV, N, i). Four items. Please provide all four inputs and then the answer.