If the required rate of return on both bonds is 12 percent compounded semi-annually, what is the current price of Bond M and Bond N. See attached file for full problem description.© BrainMass Inc. brainmass.com June 3, 2020, 7:32 pm ad1c9bdddf
The price will be the present value of all the payments from the bonds.
There are three discrete batches of cash flows: $1000 every six months from 6.50 years to 14 years, $1750 every six months from 14.50 years to 20 years; the final principal lump sum payment of $20,000.
We first find the ...
The solution explains how to calculate the price of a bond.