Question
Java Spirit Ltd. is seeking financing for a new initiative it is contemplating. It intends to issue a new series of bonds on January 1,
Java Spirit Ltd. is seeking financing for a new initiative it is contemplating. It intends to issue a new series of bonds on January 1, 2022, with a $1,000 par value. They are expected to mature in 25 years and will have a coupon rate of 7%, paid semi-annually.a) What is the expected maturity date of the bonds?
b) What is the expected price of the bond on December 31, 2029, if interest rates were 10%? How would the bonds be classified?
c) What is the expected price of the bonds on January 1, 2038, if interest rates were 7%? How would these bonds be classified?
d) What is the bonds expected price on June 30, 2042, if interest rates had fallen to 5%? How would these bonds be classified?
e) What lessons can we learn from parts (b) to (d) above?
f) What is the bonds
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