Zenith Corporation has a 5% $1,000,000 bond issue with a maturity of 12 years. Due to a
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- Zenith Corporation has a 5% $1,000,000 bond issue with a maturity of 12 years. Due to a sudden surge in inflation due to our national debt, the market rate of interest is currently 7%. Interest is paid semi-annually. Show work!
- Will the bond be sold at a “premium”, “par”, or “discount”?
- What will be the price and the proceeds?
2) Four years after the original issue (#1 above), with 8 years remaining on the original bond, all banks are taken over the federal government and the current market rate of interest for all “new” bonds will be 3% (market rate of interest) and the current owner decides to sell the bond and move to Australia which has a stronger form of capitalism.
- Will the bond be sold at a “premium”, “par”, or “discount”?
- What will be the price and the proceeds?
Related Book For
Fundamentals of Investments, Valuation and Management
ISBN: 978-1259720697
8th edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
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