Leggio Corporation
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Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?
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This solution is comprised of a detailed explanation to answer what is the new price of the bonds, given that they now have 19 years to maturity.
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7. Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?
$1,046.59
$1,111.58
$1,133.40
$1,177.78
$1,189.04
where B is the issued price/current price
C is the coupon payment
r is the current interest rate
n is the period
B = 70 x [1 - 1 ] + 1,000
(1.06)19 (1.06)19
0.06
B = ...
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