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    Determining the Market Value of A Bond

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    A ten percent coupon rate bond pays interest semi-annually. Par value is $1,000. It has three years to maturity. Investors' required rate of return is 12 percent. What is the present value of the bond?

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    Solution Preview

    You can find this answer in either of two ways. I am going to break it down for you to the easier, but longer, way. A coupon bond is really an annuity of interest payments (in this case, $50 twice per year for 3 years) and a lump-sum par value ...

    Solution Summary

    This solution illustrates how to determine the market value of a bond when the going market rate differs from its coupon rate.