ABC Pharmaceuticals Inc. issued $50 million in bonds due in 15 years. After discussions with...
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ABC Pharmaceuticals Inc. issued $50 million in bonds due in 15 years. After discussions with its investment banker, ABC decided that the bonds would be issued with a coupon rate of 8 percent with interest paid annually a) Explain why the coupon rate is equal to the required rate of return (yield to maturity) at the time of bond issuance. A few days after issuing the bonds, ABC announced that it was under investigation by the US government for falsifying results regarding the side-effects of a drug it previous developed. b) What would happen to the required rate of return on ABC's bonds? EXPLAIN c) Suppose investor now require a 16% return on the bonds. Determine the price of the bond
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