A Firm Issues 20-Year Bonds with a Coupon Rate of 4.8%,paid

question 32

Multiple Choice

A firm issues 20-year bonds with a coupon rate of 4.8%,paid semiannually.The credit spread for this firm's 20-year debt is 1.2%.New 20-year Treasury notes are being issued at par with a coupon rate of 4.6%.What should the price of the firm's outstanding 20-year bonds be if their face value is $1000?

• A)$882.53
• B)$975.98
• C)$977.48
• D)$1000.86

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Definitions:

Statement Of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company, showing how well it manages its cash position.

Cash Balance

The amount of cash held in a company's bank account and on hand at any given time.

Dividends Declared

Profits distributed by a company to its shareholders out of its earnings, based on the number of shares owned.