Calculate Bond Face Value
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Please help with the following problem. Provide calculations and explanations.
1. How much should a $1,000-face-value bonds sell for, assuming the following conditions:
- The bond pays a coupon of 11%
- The coupon payments are paid annually.
- The required rate of return on similar-risk investments is 9%.
- The bond matures in 15 years
2. How much should a $1,000-face-value bonds sell for, assuming the following conditions:
- The bond pays a coupon of 7%
- The coupon payments are paid semi-annually.
- The required rate of return on similar-risk investments is 7%.
- The bond matures in 10 years
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Solution Summary
This posting helps with business math. The solution helps calculate bond face value. Calculations are provided along with explanations.
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1. First, we need to calculate how much the bonds have been issued by using the formula as follows:
where B is the issued price
C is the coupon payment
r is the effective rate
n is the period
However, in order to calculate the price of the bond, ...
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