Calculating fair value of a coupon paying bond
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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
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Solution Summary
The solution describes the steps to calculate fair value of a coupon paying bond.
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Maturity amount=M=$1000
Required rate of return=r=11%
Coupon ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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