Question:
Ciza Inc. raised $100 million by floating corporate bonds. Each bond paid a coupon of 7% with a par value of $1000 and will mature in 4 years.
a. Determine the current market value of the bond if the required rate of return is 14%.
b. Holding everything constant and assuming that the coupon is paid on a semiannual basis, what is the intrinsic value of the bond to you?
c. Assume annual coupon payments but 20 years remaining to maturity. What is the value of the bond?
d. What is the bonds current yield?