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sir i have a doubt related to this, they say that 10% loan notes were paid off. so we should have used the MV of debt which is quoted as $96, but the examiner seems to have used the book value.
Is either approach fine? Or we will always repay debt at book value, when nothing is stated.
If nothing is stated then assume that they are paid off at the nominal/par/book value.
Hello Sir. My question relates to Conejo (Q1 Sept/Dec. 2017) and more precisely to Appendix 1 ( coupon rate required from new bond). I don’t understand why they added the extra “$100*1.0362^-5” when calculating the new coupon. I understand the rest but I want to know the reason why that extra mentioned above is also part of the equation. Thank you.
In future you must start a new thread when you are asking about a different question.
The MV is the PV of the future receipts to the investor. The receipts are the interest each year (R) for 5 years and the redemption at par in 5 years time.
The 100 x (1/(1.0362^5)) is the redemption amount of $100 discounted for 5 years at 3.62%
Hello Sir I am trying to create a new topic so that I can ask you some questions but it doesn’t work. How can I create a new thread?
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