Consumer Staples Inc. issues $8 million worth of three-year bonds that pay an annual coupon of 8%

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Consumer Staples Inc. issues $8 million worth of three-year bonds that pay an annual coupon of 8% (stated rate). However, the yield to maturity (market rate) is 6%. What is the value of the initial liability recorded on its balance sheet?

a) 1,710,728

b) 7,587,664

c) 6,716,954

d) 8,427,682

e) 8,000,000

Related Book For answer-question

Fundamentals of Corporate Finance

ISBN: 978-0132148238

2nd edition

Authors: Berk, DeMarzo, Harford

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Posted Date: Oct 16, 2020 11:02 PM

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Consumer Staples Inc. issues $8 million worth of three-year bonds that pay an annual coupon of 8%

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Since Annual coupon of 8 is greater then Yield to maturity market rate 6 Investors will be willing t... View the full answer

Fundamentals of Corporate Finance

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