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What amount would the corporation have raised

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Question - A highly rated corporation has issued $1 million of debentures, with a fixed-interest coupon equal to current interest rates of 13.00 per cent per annum, coupons paid half-yearly and a maturity of seven years.

Required -

a) What amount would the corporation have raised on the initial issue of the debentures?

b) After one year, yields on identical types of securities are now 12.00 per cent per annum. The existing debenture now has exactly six years to maturity. What is the value, or price, of the existing debenture in the secondary market?

c) Explain why the value of the debenture has changed.

Reference no: EM133072411

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