Stanovich enterprises has 10-year 120 semiannual coupon, Ask an Expert

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Stanovich Enterprises has 10-year, 12.0% semiannual coupon bonds outstanding. Each bond is now eligible to be called at a call price of $1,060. If the bonds are called, the company must replace them with new 10-year bonds. The flotation cost of issuing new bonds is estimated to be $45 per bond. How low would the yield to maturity on the new bonds have to be in order for it to be profitable to call the bonds today, i.e., what is the nominal annual "breakeven rate"?

9.29%

9.78%

10.29%

10.81%

11.35%

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Financial Management, Finance

Category:- Financial Management
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