Exactly 2 years ago your company issued a series of 5-year, 9% bonds, with coupon payments...

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Finance

Exactly 2 years ago your company issued a series of 5-year, 9%bonds, with coupon payments made semi- annually. The bonds have aface value of $1000. The bonds also have a call feature attached tothem which allows your company to call the bonds three years afterthe issuing date (i.e. After the 6th coupon payment) at a premiumof 10% above the face value. Investors currently require an annualreturn of 12% on their investment in your company’s bonds. a.Should your company call the bonds? Please explain your answer inno more than two sentences. Please show the basis of calculationb. What isthe currentvalue of asingle bond? Tip:The response depends onyour answer in part

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Time value of money refers to the concept inwhich it is dominantly stated that the present value of money whichis to be received in future will be low after removing the effectof interest factorFollowing is the formula table for computation of requiredreturn of investor at the time of See Answer

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Exactly 2 years ago your company issued a series of 5-year, 9%bonds, with coupon payments made semi- annually. The bonds have aface value of $1000. The bonds also have a call feature attached tothem which allows your company to call the bonds three years afterthe issuing date (i.e. After the 6th coupon payment) at a premiumof 10% above the face value. Investors currently require an annualreturn of 12% on their investment in your company’s bonds. a.Should your company call the bonds? Please explain your answer inno more than two sentences. Please show the basis of calculationb. What isthe currentvalue of asingle bond? Tip:The response depends onyour answer in part