The company is planning to issue $20 million in bonds to help build an amusement park. The
Question:
The company is planning to issue $20 million in bonds to help build an amusement park. The coupon rate will be 9% with interest paid annually. The bonds will mature is 10 years. Assume current required rates of return by bond ratings are:
a. What rating must the bonds carry to sell at their par (face value, $1,000) when issued?
b. If the bonds are rated “Ba” when issued, what will the price per bond equal when they are issued?
c. If the bonds are rated “Ba” when issued, how much money (total for the bond issue) will the company receive when the bonds are issued?
d. How could the company raise the full $20 million from this bond issue?
(Solve using financial formulas, not excel).
Financial Accounting
ISBN: 978-1259222139
9th edition
Authors: Robert Libby, Patricia Libby, Frank Hodge