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Primula Corporation decides to issue a 30-year corporate bond. The bond carries a coupon of 6%, which represents the underlying 30-Year Treasury Note yield of
Primula Corporation decides to issue a 30-year corporate bond. The bond carries a coupon of 6%, which represents the underlying 30-Year Treasury Note yield of 4% plus a 2% credit spread. If the yield-to-maturity (YTM) of the bond at issuance is also 6%, what is the price of the bond? A year later, the 30-Year Treasury still yields 4%, but the Primula credit spread has widened to 3%. What is the new price of the bond? If you decided to buy $10,000 worth of Primula bonds at a yield of 8%, what is the NPV of that purchase?
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