Gonzalez Electric Company has outstanding a 10 percent bond issue with a face value of $1,000 per bond and three years to maturity.
Gonzalez Electric Company has outstanding a 10 percent bond
issue with a face value of $1,000 per bond and three years to maturity.
Interest is payable annually. The bonds are privately held by Suresafe
Fire Insurance Company.
Suresafe wishes to sell the bonds, and is negotiating with another
party. It estimates that, in current market conditions, the bonds should
provide a (nominal annual) return of 14 percent. What price per bond
should Suresafe be able to realize on the sale?
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