Dani Corporation has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $10. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, a coupon rate of 4 percent, and sells for 96 percent of par. The second issue has a face value of $65 million, a coupon rate of 3 percent, and sells for 108 percent of par. The first issue matures in 20 years, the second in 9 years. Both bonds make semiannual coupon payments.
Dani Corporation has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $10. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, a coupon rate of 4 percent, and sells for 96 percent of par. The second issue has a face value of $65 million, a coupon rate of 3 percent, and sells for 108 percent of par. The first issue matures in 20 years, the second in 9 years. Both bonds make semiannual coupon payments.
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 14P
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