. A bond that matures in 10 years sells for $925. The bond has a face value of $1,000 andan 8 percent annual coupon. i. What is the bond’s current

. A bond that matures in 10 years sells for $925. The bond has a face value of $1,000 andan 8 percent annual coupon.

i. What is the bond’s current yield?

ii. What is the bond’s YTM?

iii. Assume the YTM remains the same for the next three years, what will be the priceof the bond three years from today?

The following is the balance sheet for XYZ Corporation’s as at December 31, 2015

Long-term debt (bonds, at par) $10,000,000

Preferred stock 2,000,000

Common stock ($10 par) 4,000,000

Total Liabilities and Equity $16,000,000

The bonds have a 4 percent coupon rate, payable semiannually, and a par value of $1,000. They mature in 10 years’ time. The yield to maturity is 12 percent, so the bonds now sellbelow par.  Determine the current market value of the firm’s debt?

Leave a Reply