KIC, Inc., plans to issue $8 million of bonds with a coupon rate of 6 percent an

Question

KIC, Inc., plans to issue $8 million of bonds with a coupon rate of 6 percent and 30 years to maturity. The current market interest rates on these bonds are 10 percent. In one year, the interest rate on the bonds will be either 10 percent or 4 percent with equal probability. Assume investors are risk-neutral a. If the bonds are noncallable, what is the price of the bonds today? Assume a par value of $1,000 and semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Par Value of Bonds = $ 1000

Nper = 30 = 30*2 = 60(As payments are semi annual)

Coupon rate = 6%

Annual Coupons(PMT) = 60 = 30 semi annually

YTM(rate) = 10% pa = 5% semi annually

Price of Bonds = PV(rate,nper, pmt, FV) = $ 621.41

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.