A company is considering issuing a bond with a face value of $1,000, a coupon rate of 6%, and a maturity of 10 years. The bond will be sold at a discount and will yield 8%.

a) What is the initial price of the bond?
b) What is the annual interest payment?
c) What is the yield to maturity of the bond?
d) If the market interest rate rises to 10%, what will be the new price of the bond?
e) If the market interest rate rises to 10%, should the company consider calling the bond? Explain.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a The initial price of the bond can be calculated as follows PV C 1 r C 1 r2 C 1 rn FV 1 rn Where C coupon payment 60 1000 6 r yield to mat... View the full answer