Question: TC has an outstanding bond issue, payable semi-annually, that originally had a 20-year maturity. The initial bond offering was sold 8 years ago, at par

TC has an outstanding bond issue, payable semi-annually, that originally had a 20-year maturity. The initial bond offering was sold 8 years ago, at par and raised $19.40 million dollars. (To be specific 19,400 bonds were sold at $1,000 each.) The yield to maturity, when they were issued, was 6.40 percent. Currently, the nominal yield to maturity on bonds with similar risk is at 5.71 percent.

Requirements:

a. What is the market value of each bond?

b. What is the nominal yield to maturity?

c. What is the effective yield to maturity?

d. Calculate the yield on bonds (using effective yield to maturity)?

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a To calculate the market value of each bond we need to use the present value formula PV C21r2n C21r2n1 C21r22n1 F1r22n where PV is the present value of the bond C is the coupon payment r is the yield ... View full answer

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