The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par (P1,000), have a 12% coupon, and mature in 30 years on December 31, 2008. Coupon payments are made semiannually (on June 30 and December 31). (a) What was the YTM of Pennington’s bonds on January 1, 1979? (b) What was the price of the bond on January 1, 1984, 5 years later assuming that the level of interest rate had fallen to 10%? (c) Find the current yield and capital gains yield on the bond on January 1, 1984, given the price as determined in Question b.

The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par (P1,000), have a 12% coupon, and mature in 30 years on December 31, 2008. Coupon payments are made semiannually (on June 30 and December 31). (a) What was the YTM of Pennington’s bonds on January 1, 1979? (b) What was the price of the bond on January 1, 1984, 5 years later assuming that the level of interest rate had fallen to 10%? (c) Find the current yield and capital gains yield on the bond on January 1, 1984, given the price as determined in Question b.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EB: Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual...

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