Coupon rate should bonds have in order to sell at par value

Assignment Help Financial Management

Reference no: EM131878591

Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,195. One-year interest rates are 13 percent. There is a 60 percent probability that long-term interest rates one year from today will be 14 percent, and a 40 percent probability that they will be 12 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Reference no: EM131878591

Questions Cloud

Describe how company responded to the effects of the event : Can you identify a company that has been affected significantly by value based management or integrated risk management and describe how it responded.

Describe the various steps and barriers to communications : Identify and discuss the various steps and barriers to communications (proconceived ideas,use of personalized meanings, lack of motivation or interest)

Realized rate of return for investor who purchased bonds : Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called.

Explain impact of given external factor on om strategy : Identify how changes in the external environment affect the OM strategy for a company. For instance, discuss what impact the following external factors.

Coupon rate should bonds have in order to sell at par value : Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value?

How does parenthood change adults : Identify and briefly describe each of Galinsky's 6 stages of parenthood. How does parenthood change adults and stimulate further development as they move.

How much will be your payments over the first eight years : How much will be your monthly payment? How much will be your payments over the first eight years?

Describe an actual or emerging problem : Identify and describe an actual or emerging problem, within a system of interest. The problem should be one in which unexpected and/or undesired results.

Choose to borrow money at lower effective annual rate : WhiteShark Bank charges effective monthly rate of 0.77 percent. As borrower, from which bank would you choose to borrow money at lower effective annual rate?

User Account

All Pages