Question

Kidder Corporation's balance sheet shows an historical book value for long-term debt (bonds, at par) of...

Kidder Corporation's balance sheet shows an historical book value for long-term debt (bonds, at par) of exist 23,500,000. The bonds have an 6.4% coupon rate, payable semiannually, and a par value of exist 1,000. They mature exactly 10 years from today. The yield to maturity is 9.25% so the bonds now sell below par what is the current value of the firms debt?

Homework Answers

Answer #1
                  K = Nx2
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =10x2
Bond Price =∑ [(6.4*1000/200)/(1 + 9.25/200)^k]     +   1000/(1 + 9.25/200)^10x2
                   k=1
Bond Price = 816.63

Current value = Price*book value/par value = 816.63*23500000/1000 = 19190805

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