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At the beginning of 2014, ABC Corp. issued (sold) $50 million in 20-year callable bonds at par

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At the beginning of 2014, ABC Corp. issued (sold) $50 million in 20-year callable bonds at par;value of $1,000 paying an 8% annual coupon rate that is paid semiannually. The bonds are;callable after 5 years for a call premium equal to one annual coupon payment. During 2014;interest rates dropped significantly and ABCs bonds are now trading for $1,130.25.;a. What is the amount of the semiannual payment received (PMT) from investing in this;bond?;b. What is the new yield to maturity (YTM) of the bonds at the beginning of 2015?;c. What is the new yield to call (YTC) at the beginning of 2015?;d. Should investors expect to receive YTC or YTM?;e. How much will the firm save or lose each year in interest if the existing bonds are called;and reissued? You may ignore any costs involved in calling/re-issuing the bonds.

 

Paper#29266 | Written in 18-Jul-2015

Price : $27
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