Value of Bonds and Company Bonds Maturing
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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
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Solution Summary
The solution explains how to calculate the value of bond. If interest rate was paid annually is examined.
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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 ...
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