What is the bonds value, Financial Management

Third Inc. wishes to issue a perpetual callable bond. The current interest rate is 6%. Next year, there is a 30% chance that the interest rate will be 4.5% and a 70% chance that the rate will be 8.0%. The bond is callable at $1,000 plus an additional coupon payment and it will be called if the interest rate drops to 4.5%.

a. If the bond sells for par today, what is the coupon?

b. What is the bond's value today if the coupon is set at $70?

c. If the bond is priced at $1,000, what is the cost to Third of the call provision?

Posted Date: 3/9/2013 5:11:47 AM | Location : United States







Related Discussions:- What is the bonds value, Assignment Help, Ask Question on What is the bonds value, Get Answer, Expert's Help, What is the bonds value Discussions

Write discussion on What is the bonds value
Your posts are moderated
Related Questions
evaluate the importance of leverage in financial management of a small scale company

Normally, floater coupon rate moves in the same direction as the reference rate. That is, with an increase in the reference rate, the floater coupon rate also increases

What is Creative accounting Creative accounting (also termed as aggressive accounting or earnings management) distorts financial analysis of company accounts. Creative accounti

What is the Benefits of divestment ¸ Releases cash tied up to finance more promising opportunities. ¸ Reduces diversification and complexity of a group in case of a demerger

Sensitivity analysis A sensitivity analysis studies the impact of specified variations in key factors on the initially-calculated NPV. The initial point for a sensitivity analy

what is logical process modelling? what is physical modelling?

what is the value of beta for this fund ? If the benchmark index for this mutual fund increased by 11.00% during the period covered by beta measure, what was the rate of return for

After the bid Tactics can be undertaken by directors to ensure that their shareholders don't accept the bid, if that is what they desire. Reject Share

Q. What are the misstatements? A Misstatement is Inconsequential - If a reasonable person would determine after considering the possibility of further undetected misstatement

The holder of a corporate debt instrument is preferred to equity shareholders in the bankruptcy proceedings. However, secured/senior creditors are preferred to no