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

question 33

Multiple Choice

A firm issues 20-year bonds with a coupon rate of 4.8%,paid semi-annually.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
• E)$981.23

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Definitions:

Adult Americans

Individuals living in the United States who are 18 years of age or older.

Share

A unit of ownership interest in a corporation or financial asset that provides for an equal distribution in any profits, if any are declared, in the form of dividends.

Democracy

A form of government in which power is vested in the people, who rule either directly or through freely elected representatives.

Alexander Tytler

A Scottish historian and writer often cited, sometimes inaccurately, in discussions about democracy and societal cycles.