Reference no: EM132503529

Great Lakes Company's has long-term debt. In its 2019 annual report the company reports that its long-term debt consists of $600 million, 7.125% bonds, due at the end of 2035. Looking up in Yahoo! Finance Bond Center, the following information is available as of the beginning of 2019:

Bond Market Price = 142.72 (that means 142.72% of face value)

Yield to maturity = 3.623%

Current Yield = 4.992%

• Assume the bond pays interest annually and interest is compounded annually.

Question a. Assuming that the bonds were originally issued at par value, what does the market price reveal about interest rate changes since Great Lakes issued its notes? (assume that the company's credit rating has remained the same).

Question b. Does the change in interest rates since the issuance of these notes affect the amount of interest expense that Great Lakes reports in its income statement? Explain

Question c. How much cash would Deere would have to pay to repurchase the 7.125% bonds at the quoted market price of 142.72% ? (assume no interest is owed on the date of the purchase). How would the repurchase affect the company's current net income?

Question d. Assuming the bonds remain outstanding until their maturity, at what market price will the bonds sell on their due date at the end of 2031?

Question e. Show the calculation for the current yield of 4.992% that has been shown above

Question f. Show the calculation for the yield to maturity of 3.623% shown above . You may not come up with the exact number but you should get something close).