arianabruton1707 arianabruton1707
  • 26-04-2021
  • Mathematics
contestada

KatyDid Clothes has a $120 million (face value) 25-year bond issue selling for 103 percent of par that carries a coupon rate of 9 percent, paid semiannually.

Respuesta :

andromache andromache
  • 28-04-2021

Answer:

8.704%

Step-by-step explanation:

The computation of the before cost of debt is as follows

Given that

Future value = $100

Present value = $103

NPER = 25 × 2 = 50

PMT = $100 × 9% ÷ 2 = $4.5

The formula is presented below:

= -RATE(NPER;PMT;PV;FV;TYPE)

After applying the above formula, the rate is 4.3518%

Yearly rate is

= 4.3518% ×2

= 8.704%

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