Bond trading on the secondary market

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A) Crimson Tide Incorporated has a bond trading on the secondary market that will mature in six years. The bond pays a semi-annual coupon with a coupon rate of 9.50% APR. Based on the economy and risk associated with Crimson Tide, you seek a 13.98% APR return on Crimson Tide debt. The face value of the bond is $1,000. What price are you willing to pay for the bond?

b) Cinqua Terra Incorporated issued 10-year bonds three years ago with a coupon rate of 7.625% APR. The bonds pay semi-annual coupons, have a face value of $1,000.00 each and were issued at par value. What is the price of the Cinque Terra bond’s today if investors want a 5.94% APR return for bonds of similar risk and maturity?

Reference no: EM131875298

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