Cox Media Corporation pays a coupon rate of 10 percent on debentures that are due in...

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Finance

Cox Media Corporation pays a coupon rate of 10 percent ondebentures that are due in 20 years. The current yield to maturityon bonds of similar risk is 8 percent. The bonds are currentlycallable at $1,150. The theoretical value of the bonds will beequal to the present value of the expected cash flow from thebonds. Use Appendix B and Appendix D for an approximate answer butcalculate your final answer using the formula and financialcalculator methods.

a. Find the market value of the bonds usingsemiannual analysis. (Ignore the call price in your answer.Do not round intermediate calculations and round your answer to 2decimal places.)

b. Do you think the bonds will sell for the priceyou arrived at in part a?

Yes
No

Answer & Explanation Solved by verified expert

3.7 Ratings (418 Votes)

1Current market value of the Bond The Current market value of the Bond is the Present Value of the Coupon Payments plus the Present Value of the face Value Face Value of the bond 1000 Semiannual Coupon Amount 55 See Answer

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Cox Media Corporation pays a coupon rate of 10 percent ondebentures that are due in 20 years. The current yield to maturityon bonds of similar risk is 8 percent. The bonds are currentlycallable at $1,150. The theoretical value of the bonds will beequal to the present value of the expected cash flow from thebonds. Use Appendix B and Appendix D for an approximate answer butcalculate your final answer using the formula and financialcalculator methods.a. Find the market value of the bonds usingsemiannual analysis. (Ignore the call price in your answer.Do not round intermediate calculations and round your answer to 2decimal places.) b. Do you think the bonds will sell for the priceyou arrived at in part a? YesNo