Option for financing is to call in the outstanding bonds

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Reference no: EM131052273

Another option for financing is to call in the outstanding bonds you have issued and obtain a loan with more favorable terms than the bonds you would issue. Presently, the company has a 6% coupon bond that matures in 11 years.

The bond pays interest semiannually. What is the market price of a $1,000 face value bond if the current rate of interest is 12.9%?

How much will it cost the company to call in 1,000 of these bonds? Is it worth pursuing this strategy if your interest rate on a loan is 13%? Please work out the problem

Reference no: EM131052273

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