Zheng Enterprises, a multinational drug company specializing in Chinese medicines, issued $100 million of 15 percent coupon

Question:

Zheng Enterprises, a multinational drug company specializing in Chinese medicines, issued $100 million of 15 percent coupon rate bonds in January 2009. The bonds had an initial maturity of 30 years. The bonds were sold at par and were callable in five years at 110 (that is, 110 percent of par value). It is now January 2014, and interest rates have declined such that bonds of equivalent remaining maturity now sell to yield 11 percent. How much would you be willing to pay for one of these bonds today? Why?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Contemporary Financial Management

ISBN: 978-1285198842

13th edition

Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao

Question Posted: