Value of a bond
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How do you calculate the value of a bond that will mature in 14 years and has a face value of $1,000 if the annual coupon interest rate is 7% and the investor's required rate of return is 10%?
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Solution Summary
This solution contains step-by-step calculations to determine the value of the bond in an Excel file by using time to maturity, face value, annual coupon interest and required rate of return.
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How do you calculate the value of a bond that will mature in 14 years and has a face value of $1,000 if the annual coupon interest rate is 7% and the investor's required rate of return is 10%?
It has not been mentioned whether annual or semi annual interest is paid.
The value is calculated for both the cases.
To calculate the value of the bond we need to calculate / read from tables the values of
PVIF= Present Value Interest Factor
PVIFA= Present Value Interest Factor for an Annuity
Value of bond= PVIF * Maturity value + PVIFA * ...
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