Bonds outstanding with face value

Assignment Help Financial Management

Reference no: EM131901813

Scenario : Kaufmann enterprises has bonds outstanding with a face value of $1,000 and 10 years till maturity. They have an 11% annual coupon rate, and a PV of $1,175. They can be called in 5 years at 109% of face value. Starting in year 5, the bonds the firm has the right to call the bonds. In 4 yers the call percentage will decine by 1%. The question is: If the yield curve is horizontal and interest rates remain at current level, when is the latest that investors my expect the firm to call the bonds? The answer is in year 6, when the YTC is 8.27%. My question: I don't fully understand why the answer is 6? Can you elaborate? Also I got a YTM in year 6 of 7.3%, is that correct? I'm asking that you explain the answer.

Reference no: EM131901813

Questions Cloud

Accounting break-even level of sales if firm pays no taxes : What is the accounting break-even level of sales if the firm pays no taxes?

Explain about how tax cuts or rebates affect millions : Thinking deeper about your answers, explain about how tax cuts or rebates affect millions of other people and their decisions

How much will leslie accumulate in three years : How much will Leslie accumulate in three years by depositing $540 at the beginning of each of the next 12 quarters?

Which strategy appears to have been the riskiest and why : Which of these investment styles would have been the most profitable to invest in over the following periods ending February 25, 2011.

Bonds outstanding with face value : Kaufmann enterprises has bonds outstanding with a face value of $1,000 and 10 years till maturity.

Discuss what climate change is and its effects : ECO212-ENVIRONMENTAL ECONOMICS - Critically and systematically integrate knowledge in contemporary topics in Environmental economics

How much should the initial deposit be : A couple just welcomed the birth of their new child and decides to set up a an interest-bearing account for the child's college tuition.

Pros and cons of using expansionary and contractionary : What are the pros and cons of using expansionary and contractionary monetary policy tools under the following scenarios: depression, recession

Reproduce the retained earnings account for the year : Reproduce the Retained Earnings account for the year. Prepare the stockholders' equity section of the balance sheet at December 31.

User Account

All Pages