Lloyd Corporation's 14% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 30 years, are callable 5 years from today at $1,050

Finance Sep 25, 2020

Lloyd Corporation's 14% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 30 years, are callable 5 years from today at $1,050. They sell at a price of $1,353.54, and the yield curve is flat. Assume that interest rates are expected to remain at their current level.

a. What is the best estimate of these bond's remaining life?

Expert Solution

According to the question the coupon rate 14% is greater than the current interest rate which is expected to remains constant

So the answer is 5 years remaining life

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