Question

Flower Valley Company bonds have a 14.87 percent coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature in 5 years from now. Compute the value of Flower Valley Company bonds if investors’ required rate of return is 9.39 percent. Round the answer to two decimal places.

Answer #1

Value of Flower Valley Company bonds is |
$ 1,214.74 |
||||||||||

Working: | |||||||||||

Value of Flower Valley Company bonds | = | =-pv(rate,nper,pmt,fv) | |||||||||

= | $ 1,214.74 | ||||||||||

Where, | |||||||||||

rate | Required rate of return | = | 9.39%/2 | = | 0.04695 | ||||||

nper | Number of period | = | 5*2 | = | 10 | ||||||

pmt | Semi annual coupon paid in cash | = | 1000*14.87%*6/12 | = | $ 74.35 | ||||||

fv | Par Value | = | = | $ 1,000.00 | |||||||

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