HW 5 CORP FIN PART 1 IMEX Global Solutions issued a bond on December 31, 2017 to
ID: 2621227 • Letter: H
Question
HW 5 CORP FIN PART 1
IMEX Global Solutions issued a bond on December 31, 2017 to the public which pays $80 once per year in interest and a $1,000 principal repayment after year 10, and is priced in the open market to reflect a required return of 11.5% to bondholders, or $798. The company’s management has the option of redeeming this bond early for $1,060 plus any accrued interest. As it relates to the IMEX bonds, identify the following: 1. Face value 2. Market value 3. Coupon rate 4. Current yield 5. Yield to maturity 6. Call premium 7.Maturity
NO SCREEN SHOTS OR IMAGES OF RESPONSE. PLEASE TYPE YOUR ANSWER OR UPLOAD DOCUMENT IF REQUIREMENTS MENTIONED ABOVE ARE NOT MET I WILL GIVE A NEGATIVE RATING
Explanation / Answer
Face value : It is value at which bond was issued and value which would be given back on redemption, Thus Face value = $1000
Market value: Value at which bond is traded is called market value , Thus market value is $798
Coupon rate : Coupon rate is nothing but interest/Face value
Thus Coupon rate = 80/1000
=8%
Current yield : 11.5%
Call premium = 1060-1000/1000
=60/1000
=6%
Maturity = 10 years
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