Answer to Question #245984 in Finance for Julia

Question

assume that an investor is willing to pay $908.32 for a bond (pv 1000, coupon rate 8%, maturing in 20 years)

what is the investor's required rate of return, k_d ? 9

(bond issuer's viewpoint) what if the net price after flotation costs is $850, what then will k_d be? 9.73

what is the after-tax k_d assuming tax rate of 30% ?

Answer 1

Formulas used;