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The MillerCorp would like to acquire its competitor, the ModiglianiCorp. To pay for the acquisition expenses, it is intending to issue bonds that pay semiannual
The MillerCorp would like to acquire its competitor, the ModiglianiCorp. To pay for the acquisition expenses, it is intending to issue bonds that pay semiannual coupon payments. These corporate bonds would have a coupon rate of 8 percent and their YTM would be 6 percent. The bonds would have 13 years left until their maturity. Interestingly, the ModiglianiCorp has the same plan. It wants to take a loan to acquire its competitor, the MillerCorp, by issuing corporate bonds. In fact, it already recently sold bonds for this purpose. Like the MillerCorp's bonds, its bonds pay coupons twice a year, have a 6 percent coupon rate, have a YTM of 8 percent, and they mature 13 years from today. How much money can each company borrow by selling each of its bonds? Both corporations' bonds have a $1,000 par value. In addition, if future bond rates remain unchanged, what will be the prices for both companies' bonds 1 years from now? What about 3 years, 8 years, 12 years, and 13 years from now? (Do not round your intermediate calculations. Round your final answers to 2 decimal places, e.g., 32.16.)
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