Interest rates are expected to remain at the current level

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Lloyd Corporation's 14 percent coupon rate, semiannual payment, $1,000 par value bonds, which mature in 30 years, are callable 5 years from now at a price of $1,050. The bonds sell at a price of $1,353.54, and the yield curve is flat. Assume that interest rates are expected to remain at the current level.

a. What is the best estimate of these bond’s remaining life? I got 4%

b. If Lloyd plans to raise additional capital and wants to use debt financing, what coupon rate would it have to set in order to issue new bonds at a par?

Reference no: EM131897343

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