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IBM recently issued 8 year bonds at a price of $1000. These bonds pay $60 interest every 6 months. Their price remained stable since they
IBM recently issued 8 year bonds at a price of $1000. These bonds pay $60 interest every 6 months. Their price remained stable since they were issued, that is, they still sell at par. The company wants to issue new bonds with a maturity of 3 years, a par value of $1000 and pay $50 interest every 6 months. If the investors require the same annual rate of return as they require from the existing bonds, what would be the value of the new bonds?
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