Rainier Bros.has 12.0% semiannual coupon bonds outstanding that mature in 10 years.Each bond is now eligible to be called at a call price of $1,060.If the bonds are called,the company must replace them with new 10-year bonds.The flotation cost of issuing new bonds is estimated to be $45 per bond.How low would the yield to maturity on the new bonds have to be in order for it to be profitable to call the bonds today? HINT: What is the nominal annual "breakeven rate")

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The Answer of Rainier Bros.has 12.0% semiannual coupon bonds outstanding that mature in 10 years.Each bond is now eligible to be called at a call price of $1,060.If the bonds are called,the company must replace them with new 10-year bonds.The flotation cost of issuing new bonds is estimated to be $45 per bond.How low would the yield to maturity on the new bonds have to be in order for it to be profitable to call the bonds today? HINT: What is the nominal annual "breakeven rate")