Question

Bond valuation-Semiannual interest Find the value of a bond maturing in 10 years, with a $1000 par value and a coupon interest rate of 8% (4% paid semiannually) if the required return on similar-risk bonds is 18% annual interest left parenthesis 9 % paid semiannually).

The present value of the bond is $

Answer #1

Information provided:

Par value= future value= $1,000

Time= 10 years*2= 20 semi-annual periods

Coupon rate= 8%/2= 4% per semi-annual period

Coupon payment= 0.04*1,000= $40

Yield to maturity= 18%/2= 9% per semi-annual period

Enter the below in a financial calculator to compute the present value:

FV= 1,000

PMT= 40

I/Y= 9

N= 20

Press the CPT key and PV to compute the present value.

The value obtained is 543.57.

Therefore, the present value of the
bond is **$543.57.**

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Years to
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Required stated
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A
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interest Calculate the value of each of the
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top-right corner of the data table below in order to copy its
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Bond
Par Value
Coupon
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Years to
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Required stated
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A
$1 comma 0001,000
77
%
1111
77
%
B
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