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Estimating fair value of a bond for Wallace Company

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The Wallace Company has issued a 15-year, $1,000 bond, which pays 10% interest annually. If your required annual rate of return for an investment of this risk is 9%, what is the value of this bond to you?

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Solution describes the steps and formula to estimate the fair value of a bond.

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Value of bond = Present value of annual coupon (interest) payments + Present value of ...

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Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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