Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 21P: Bond Valuation and Changes in Maturity and Required Returns Suppose Hillard Manufacturing sold an...
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Question
Lourdes Corporation's 10% coupon rate, semiannual payment, $1,000 par
- What is the best estimate of these bonds' remaining life? Round your answer to the nearest whole number.
? years
- If Lourdes 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 par? Select one (1) answer from the options below.
If Lourdes 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 par?
- Since the bonds are selling at a premium, the coupon rate should be set at the going rate, which is the YTM.
- Since Lourdes wishes to issue new bonds at par value, the coupon rate should be set the same as that on the existing bonds.
- Since Lourdes wishes to issue new bonds at par value, the coupon rate should be set the same as the current yield on the existing bonds.
- Since interest rates have risen since the bond was first issued, the coupon rate should be set at a rate above the current coupon rate.
- Since the bonds are selling at a premium, the coupon rate should be set at the going rate, which is the YTC.
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