Compute the market price of a bond. Banzai Corporation is issuing $200,000 of 8%, 5 year bonds when potential bond investors want a return of 10%. Interest is payaing semiannually. (The bonds are selling at a discount). For an example, refer to Chapter 15, page 668. An example of the computations you need to make are shown in Illustration 15A-10. You will need to use Tables 15A-1 and 15A-2 located with the chapter.
The market price of the bond is the present value of interest and principal discounted at the required return
The semiannual interest ...
Solution Summary
The solution explains how to calculate the market price of a bond
$2.19
See Also This Related BrainMass Solution
Callable Bonds, Market Price, and Applicable interest rate
Suppose a bond with a par value of $1000 pays an annual coupon payment of $100. Interest rates are currently at 7% for all maturities of the same default risk as this bond. The bond has 10 years until maturity but is callable beginning in 2 years at a $75 call premium (that is, for $1075.00).
a. If interest rates remain the same, would you expect the bond to be called in 2 years?
b. Given your answer in (a), what would be the current market price of this bond?
c. What level of interest rates would make the firm indifferent between calling the bond and having it remain outstanding?
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