A bond has the following features: Coupon rate of interest: 5% Principal: $1,000 Term to maturity: 10 years A. What will the holder receive when the

A bond has the following features:

  • Coupon rate of interest: 5%
  • Principal: $1,000
  • Term to maturity: 10 years

A. What will the holder receive when the bond matures?

B. If the current rate of interest on comparable debt is 8%, what should be the price of this bond? Would you expect the firm to call this bond? Why?

C. If the bond has a sinking fund that requires the firm to set aside annually with a trustee sufficient funds to retire the entire issue at maturity, how much must the firm remit each year for ten years if the funds earn 8% annually and there is $100 million outstanding?

  • Please show all work. Thank you!

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