Question
Disney has just issued a 10-year bond to finance its digital strategy. The face value of the bond is 1,000$. The bond is based
Disney has just issued a 10-year bond to finance its digital strategy. The face value of the bond is 1,000$. The bond is based in USA and pays coupon semi- annually. The annualized coupon rate is 2%. The current interest rate for this bond is 0.95% in semi- annual terms. (20 points) Please calculate: The PV of the bond a. b. If the bond is quoted in the market at 1,012$, will you recommend the purchase? c. Is the bond sold at discount, par or premium? d. If you expect the annual interest rates to fall by 0.5%, what would you recommend doing?
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SOLUTION a To calculate the present value PV of the bond we need to discount each of the semiannual coupon payments and the face value using the curre...Get Instant Access to Expert-Tailored Solutions
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Quantitative Analysis For Management
Authors: Barry Render, Ralph M. Stair, Michael E. Hanna
11th Edition
9780132997621, 132149117, 132997622, 978-0132149112
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