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18 July, 11:34

A firm issues two-year bonds with a coupon rate of 6.3%, paid semiannually. The credit spread for this firm's two-year debt is 0.8%. New two-year Treasury notes are being issued at par with a coupon rate of 4.0%. What should the price of the firm's outstanding two-year bonds be per $100 of face value?

A) $102.83

B) $143.96

C) $123.39

D) $82.26

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  1. 18 July, 13:42
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    A) $102.83

    Explanation:

    C/Y = P/Y

    = 2

    N = 4

    I/Y = 4.8

    PMT = 100*6.3%/2

    = 3.15

    FV = - 100

    PV = 102.83

    Therefore, The price of the firm's outstanding two-year bonds be per $100 of face value is $102.83
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