Suppose that AMAT decides to call the bond one year before it is due to expire. The interest rate on one-year Treasury bonds is 2%. What price must AMAT pay to call the bonds? (based on the table below)
Issue date Amount issued Maturity Denomination, face value, or principal Interest > TABLE Summary of bond i Applied (AMAT) Offered Joint book-running managers Registered Trustee Security June 8, 2011 $600 million June 15, 2041 $1,000 5.85% per annum payable June 15 and December 15. First payment due December 2011. Issued at a price of 99.592% plus accrued interest (proceeds to com- pany 98.717%) Citi, JPMorgan Issued in fully registered form only U.S. Bank National Association Not secured. Company will not permit to have any lien on its property or assets without equally and ratably securing the debt securities. Senior notes ranking pari passu with other unsecured unsubordinated debt. If a change of control occurs and the notes are simultaneously downrated to below investment grade the company will offer to repurchase the notes. None. At whole or in part at the option of the Company with at least 30 days, but not more than 60 days, notice at the greater of (1) 100% of the principal amount or (ii) the sum of the scheduled remaining payments discounted at 30 basis points above the Treasury rate. Seniority Change of control event Sinking fund Callable Moody's rating at issue date Issue date Amount issued Maturity Denomination, face value, or principal Interest > TABLE Summary of bond i Applied (AMAT) Offered Joint book-running managers Registered Trustee Security June 8, 2011 $600 million June 15, 2041 $1,000 5.85% per annum payable June 15 and December 15. First payment due December 2011. Issued at a price of 99.592% plus accrued interest (proceeds to com- pany 98.717%) Citi, JPMorgan Issued in fully registered form only U.S. Bank National Association Not secured. Company will not permit to have any lien on its property or assets without equally and ratably securing the debt securities. Senior notes ranking pari passu with other unsecured unsubordinated debt. If a change of control occurs and the notes are simultaneously downrated to below investment grade the company will offer to repurchase the notes. None. At whole or in part at the option of the Company with at least 30 days, but not more than 60 days, notice at the greater of (1) 100% of the principal amount or (ii) the sum of the scheduled remaining payments discounted at 30 basis points above the Treasury rate. Seniority Change of control event Sinking fund Callable Moody's rating at issue date
