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does any one has solve Q jupitor, and know how to calculate market value of debt part a?
Let me know where is the question Jupiter and then I will try and help you.
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I have the same question. Jupiter was in Dec 2008 P4 exam. Thanks.
KD : 4.2% + 45 basis points = 4.65%
NOW FOR THE EXISTING MV OF DEBT:
$800*5.6% (given in the question) = $44.8 ( per year cash flow)
PV : $44.8 * 3.57 ( 4th years annuity factor at 4.65%) = $160.
Now redemption of amount at year 4 which is $800* 0.833 ( 4th year discount factor at 4.65%) = $666Existing MV of DEBT is 160 + 666= $826
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