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Bond valuation

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Calculate the present value of a bond that pays a coupon rate of 7% per year for 20 years, and matures in 20 years at its face value of $1000, using each of the following current market interest rates as the discount rate:(a) 5%; (b) 7%; (c) 9%. Show your calculations.

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Solution Preview

The present value of the bond is the present value of interest and principal discounted at the given rate. The annual interest is $70 and is an annuity and so we use the PVIFA table to ...

Solution Summary

The solution explains how to calculate the current value of a bond.

$2.19