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Hi, I’d like to ask:
The answers say:
This is an extra 67,398 bond units for which Levante co will need to pay an extra $6,739,800 when the bonds are redeemed in five years.My question:
Such extra 67,398 bond issues also create extra “Coupon payment”, but which is not mentioned in answer. Am I correct?Thanks
No. The issue price of the new bonds of $95.72 has been calculated using a coupon rate of 5%. (The market value is always the PV of the receipts to the investor discounted at the investors required rate of return).
The coupon/interest payment each year has been taken into account in calculating the issue price.
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