Estimating market value of a coupon paying bond
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On March 1, 2005, Matt purchased $63,000 of Lawson Co.'s 8%, 20-year bonds at face value. Lawson Co. has paid the annual interest due on the bonds regularly. On March 1, 2010, market interest rates had risen to 12%, and Matt is considering selling the bonds.
Required:
Using the present value table in in the attachments below, calculate the market value of Matt's bonds on March 1, 2010
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Solution Summary
Solution depicts the steps to estimate market value of a coupon paying bond with the help of attached Present Value tables.
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Number of coupon payments made=5
Number of coupon payments left=20-5=15
Coupon amount=8% of face value=63000*8%=$5040
Discount rate=12%
Refer to table 6.5 attached in the question, PV for an annuity of 1 dollar when number of periods is ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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