Cox Media Corporation pays a coupon rate of 8 percent on debentures that are due
ID: 2766633 • Letter: C
Question
Cox Media Corporation pays a coupon rate of 8 percent on debentures that are due in 20 years. The current yield to maturity on bonds of similar risk is 6 percent. The bonds are currently callable at $1,150. The theoretical value of the bonds will be equal to the present value of the expected cash flow from the bonds. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Find the market value of the bonds using semiannual analysis.
a.Find the market value of the bonds using semiannual analysis.
Explanation / Answer
Coupon is 40 semi annual
N is 40
Yield is 3% semi annual
FV is 1000 face value price.
Market value is 1231.14
Assumed the call option is not executed and bond will be held till maturity