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Answer the following questions. Show your calculations.

a. Marigold Merchants has an outstanding issue of $1,000 par value bonds with an 8% coupon interest rate. The issue pays interest annually and has 15 years remaining to its maturity date. Bonds of similar risk are currently yielding a 10% rate of return. What is the value of these Marigold Merchants bonds?

Is the bond selling at a discount or premium, and why?

b. Marigold Merchants also has an outstanding issue of $1,000 par value bonds with a 12% interest rate. The issue pays interest semiannually and has 10 years remaining to maturity. Bonds of similar risk are currently selling to yield a 10% rate of return. What is the value of these Marigold Merchants bonds?

Is the bond selling at a discount or premium, and why?

Financial Management, Finance

  • Category:- Financial Management
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