Company has bonds maturing in 6 years and pays 6% interest semiannually on a $1000 face value.
a) If required rate of return is 10%, what is the value of the bond?
b) How would answer change change if interest rate was paid annually
a) The value of bond is the present value of interest and principal discounted at required rate of return. The semi annual interest is 1,000 X 6%/2 = $30, semi annual ...
The solution explains how to calculate the value of bond. If interest rate was paid annually is examined.