In December 2002, DoubleDown, Inc. issued $100 million in bonds. These bonds originally had a 20 year maturity, a 9.5% coupon rate, and semi-annual interest payments on a $1,000 Par value. When they originated, the bonds sold at par. Since origination, the required rate of return on DoubleDown bonds has hovered between a low of 6.75% to a high of 11.5% and currently sell at par value. What is the current cost of debt (r,)for DoubleDown?

In December 2002, DoubleDown, Inc. issued $100 million in bonds. These bonds originally had a 20 year maturity, a 9.5% coupon rate, and semi-annual interest payments on a $1,000 Par value. When they originated, the bonds sold at par. Since origination, the required rate of return on DoubleDown bonds has hovered between a low of 6.75% to a high of 11.5% and currently sell at par value. What is the current cost of debt (r,)for DoubleDown?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 19P

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Question

In December 2002, DoubleDown, Inc. issued $100 million in bonds. These bonds originally had a 20 year
maturity, a 9.5% coupon rate, and semi-annual interest payments on a $1,000 Par value. When they
originated, the bonds sold at par. Since origination, the required rate of return on DoubleDown bonds has
hovered between a low of 6.75% to a high of 11.5% and currently sell at par value. What is the current cost
of debt (r,)for DoubleDown?

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