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Problem 13-09 A bond has the following features: Coupon rate of interest (paid annually): 7 percent Principal: $1,000 Term to maturity: 10 years What will

Problem 13-09

A bond has the following features:

  • Coupon rate of interest (paid annually): 7 percent
  • Principal: $1,000
  • Term to maturity: 10 years

  1. What will the holder receive when the bond matures?

    -Select-PrincipalAll coupon paymentsItem 1

  2. If the current rate of interest on comparable debt is 9 percent, what should be the price of this bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

    $

    Would you expect the firm to call this bond? Why?

    -Select-YesNoItem 3 , since the bond is selling for a -Select-discountpremiumItem 4 .

  3. If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for ten years if the funds earn 9 percent annually and there is $100 million outstanding? Use Appendix C to answer the question. Round your answer to the nearest dollar.

    $

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