Question

HMK Enterprises would like to raise $10.0 million to invest in capital expenditures. The company plans to issue​ five-year bonds with a face value of $1,000 and a coupon rate of 6.50%

​(annual payments). The following table summarizes the yield to maturity for​ five-year (annual-payment) coupon corporate bonds of various​ ratings:

Rating    AAA AA A    BBB    BB

YTM    6.20%    6.30% 6.50% 6.90% 7.50%

a. Assuming the bonds will be rated​ AA, what will be the price of the​ bonds?

b. How much of the total principal amount of these bonds must HMK issue to raise $10.0

Can you please provide the steps needed to reach the answer?

million​ today, assuming the bonds are AA​ rated? (Because HMK cannot issue a fraction of a​ bond, assume that all fractions are rounded to the nearest whole​ number.)

c. What must be the rating of the bonds for them to sell at​ par?

d. Suppose that when the bonds are​ issued, the price of each bond is $959.54. What is the likely rating of the​ bonds? Are they junk​ bonds?

a. Assuming the bonds will be rated​ AA, what will be the price of the​ bonds?

The price of the bonds will be? (Round to the nearest​ cent.)

Answer 1

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