Lloyd Corporations 14% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 30 years, are

Question:

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

a. What is the best estimate of these bonds’ remaining life?

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 par?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...