Question
Nike launched a callable bond issue on June 2016 with maturity date on June 2026. This bond issue has a coupon rate of 3.25%, paid
Nike launched a callable bond issue on June 2016 with maturity date on June 2026. This bond issue has a coupon rate of 3.25%, paid semiannually. The bond was issued at par in June 2016.
- REQUIRED
- a. If Nike decides to call this bond issue on June 2023 and interest rates in the market have risen to 4%, what is the expected price of the bond in 2023?
- b. Calculate the yield to call if the UA decides to call the bond in June 2023 under the conditions in part (a)?
- c. What are the chances that UA would call the bond if the conditions in part (a) apply? Explain.
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SOLUTION a To calculate the expected price of the bond if Nike decides to call it in June 2023 we need to compare the bonds yield to its coupon rate I...
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Intermediate accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
7th edition
978-0077614041, 9780077446475, 77614046, 007744647X, 77647092, 978-0077647094
