Question: Sun System Incorporated is issuing 20-year $1 000 face value 10% annual coupon bonds to finance its operations over the medium to long-term. If interest

  1. Sun System Incorporated is issuing 20-year $1 000 face value 10% annual coupon bonds to finance its operations over the medium to long-term.

  1. If interest is paid annually, what is the value of the firms bond when the required rate of return is 8% and 12%?

  1. Indicate, for each case at i. above, whether the bond is selling at a discount or at a premium.

  1. If the bond pays interest at 8% semi-annually, what would be the current price of the bond?

iv. If bonds are sold for $850, what will be the approximate yield to maturity of the bonds? What is the effective annual yield on the bonds?

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