ABC company had $300,000,000 of debt outstanding at Face Value. The bonds have annual 2% coupon...

	a.	$51,168,915 recognized decrease in bond value
	b.	$51,168,915 recognized increase in bond value
	c.	$37,109,838 recognized increase in bond value
	d.	$37,109,838 recognized decrease in bond value

Solutions

Expert Solution

Solution:

The value of the bond when the yield is 5% = 241,831,085.17

The value of the bond when the yield is 3% = 278,940,923.43

Change in Price = 278,940,923.43 - 241,831,085.17 = 37,109,838

The correct option is

c.	$37,109,838 recognized increase in bond value

jeff jeffy answered 2 years ago

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