A firm issues five-year bonds with a coupon rate of 6.1%, paid semiannually. The credit spread for this firm's five-year debt is 0.8%. New five-year Treasury notes are being issued at par with a coupon rate of 4%. What should the price of the firm's outstanding five-year bonds be per $100 of face value?

A firm issues five-year bonds with a coupon rate of 6.1%, paid semiannually. The credit spread for this firm's five-year debt is 0.8%. New five-year Treasury notes are being issued at par with a coupon rate of 4%. What should the price of the firm's outstanding five-year bonds be per $100 of face value?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 16P

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