Question

Kenny Enterprises has just issued a bond with a par value of $1,000​, a maturity of twenty​ years, and a coupon rate of 11.4% with semiannual payments. What is the cost of debt for Kenny Enterprises if the bond sells at the following​ prices?

a) $928

b) $1,000

c) $1,060.72

d) $1,131.49

Answer 1

a)	Cost of debt	=	=rate(nper,pmt,-pv,fv)*2		Where,
		=	12.38%		nper	=	20	*	2	=	40
					pmt	=	1000	*	11.4%*6/12	=	$             57
					pv	=					$           928
					fv	=					$       1,000
b)	Cost of debt	=	=rate(nper,pmt,-pv,fv)*2		Where,
		=	11.40%		nper	=	20	*	2	=	40
					pmt	=	1000	*	11.4%*6/12	=	$             57
					pv	=					$       1,000
					fv	=					$       1,000
c)	Cost of debt	=	=rate(nper,pmt,-pv,fv)*2		Where,
		=	10.66%		nper	=	20	*	2	=	40
					pmt	=	1000	*	11.4%*6/12	=	$             57
					pv	=					$ 1,060.72
					fv	=					$       1,000
d)	Cost of debt	=	=rate(nper,pmt,-pv,fv)*2		Where,
		=	9.88%		nper	=	20	*	2	=	40
					pmt	=	1000	*	11.4%*6/12	=	$             57
					pv	=					$ 1,131.49
					fv	=					$       1,000