Solution Library

Calculation of Marginal Cost of Debt For Raising Bonds

Question

Seven years ago ABC Inc. issued a series of $1,000 bonds (i.e. Par = $1,000) @ 10% compounded semiannually for a term of 30 years.  Additionally, the bonds are callable with a call premium of two coupon payments.  Today, the market rate is 10% and each single bond is trading for $844.76.  If ABC Inc. wants to raise new debt today, what would be ABC’s marginal cost of debt?  Assume no significant change in ABC’s bond rating.

Summary

The question belongs to Finance and it is about finding the marginal cost of debt for raising $1000 bonds or a term of 30 years. The calculations have been given in the solution in detail.

Total Word Count 234

Download Full Solution

Comments

  • HWA
    Rasha

    this is a very good website

  • HWA
    maani

    I have 50 questions for the same test your page is showing only 28

  • HWA
    joeanne

    hi can you please help or guide me to answer my assignments. thanks

  • HWA
    joeanne

    hi can anyone help or guide me to my assignments. thanks

  • HWA
    Monik


  • HWA
    Cristina

    This solution is perfect ...thanks

  • HWA
    Janete

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA
    Sandeep

    Perfect bank of solution. 

  • HWA
    Oxana

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA
    Giuseppe

    works fine.