What should be the coupon rate of the bonds

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Reference no: EM131054672

Ten years ago, News Corp. raised capital by issuing 20-year quarterly coupon bonds with $1,000 par value. a. If investors required 12% return, quarterly compounding, for News Corp.’s bonds when the bonds were issued ten years ago, what should be the coupon rate of the bonds? Calculation is not necessary but justification is required. b. Let assume that the current market interest rate is 4% lower than the rate ten years ago. Therefore, investors require 4% less from the News Corp.’s bonds (i.e., the current required return for the bonds drops to 8%). Calculate the price of the bonds today. Note that the bonds have only 10 years left to maturity

Reference no: EM131054672

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