Problem:
Cox Media Corporation pays an 11 percent coupon rate on debentures that are due in 10 years. The current yield to maturity on bonds of similar risk is 8 percent. The bonds are currently callable at $1110. The theoretical value of the bonds will be equal to the present value of the expected cash flow from the bonds.
Requirement:
Question 1: Find the market value of the bonds using semiannual analysis.
Question 2: Do you think the bonds will sell for the price you arrived at in part a?
Note: Show supporting computations in good form.