Explore BrainMass

Explore BrainMass

    Calculating fair value of a coupon paying bond

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A firm has an issue of $1,000 par value bonds with a 9% stated interest rate outstanding. The issue pays interest annually and has 20 years remaining to its maturity date. If bonds of similar risk are currently earning 11% the firms bond will sell for _________ today.

    A. $840.67

    B. $1,000.00

    C. $1,123.33

    D. $716.67

    © BrainMass Inc. brainmass.com June 4, 2020, 12:16 am ad1c9bdddf

    Solution Preview

    Maturity amount=M=$1000
    Required rate of return=r=11%
    Coupon ...

    Solution Summary

    The solution describes the steps to calculate fair value of a coupon paying bond.