3. Bond Price
Walt Disney 7% bonds due in 2032 were recently selling for 149.01.
Are the bonds selling at a premium or discount?
Is the coupon rate higher or lower than the market rate?
Will the proceeds from the bond be more or less than the face value?
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To determine whether the bonds are selling at a premium or a discount, you will need to compare the selling price with the face value of the bond.
1. Calculate the bond's premium or discount:
Premium: If the selling price is higher than the face value, it is selling at a premium.
Discount: If the selling price is lower than the face value, it is selling at a discount.
In this case, where the selling price of the bond is 149.01, you would need to know the face value of the bond to determine if it is selling at a premium or a discount.
2. Compare the coupon rate with the market rate:
The coupon rate is the annual interest rate of the bond, expressed as a percentage of its face value. The market rate, also known as the yield, is the prevailing interest rate in the market.
If the coupon rate is higher than the market rate, the bond is said to have a higher coupon rate. Conversely, if the coupon rate is lower than the market rate, the bond has a lower coupon rate.
Without knowing the coupon rate and the market rate, it is not possible to determine whether the coupon rate is higher or lower than the market rate.
3. Determine the proceeds from the bond:
The proceeds from the bond refer to the amount of money the issuer receives from the sale of the bond. It is influenced by the selling price.
If the selling price is higher than the face value, the proceeds from the bond will be more than the face value. On the other hand, if the selling price is lower than the face value, the proceeds will be less than the face value.
In this case, if the bond is selling at a premium, the proceeds will be more than the face value. If the bond is selling at a discount, the proceeds will be less than the face value.
To gather more information, you would need to find out the face value of the bond, as well as the coupon rate and the market rate.