Question

Showing appropriate equations and work, what is the value of $1,000 par value 9.375% Marriott Corporation bond for 7% required rates of return, assuming the investor will hold the bond to maturity? Assume the coupon is paid semiannually (every six months) and the bond matures in 3 years.

Answer 1

Par/Face value	1000
Coupon rate	0.09375
Annual coupon	93.75
semi-annual coupon	46.875
Present Value = Future value/[(1+(r/m))^mt]
r is the interest rate that is 7%
t is the year
m is the compounding period that is 2
mt is the time period
price of bond = sum of present value of future cash flows.
r/2	0.035
t	1	2	3	4	5	6
future cash flow	46.875	46.875	46.875	46.875	46.875	1046.875
present value	45.28986	43.75831	42.27856	40.84885	39.46749	851.6335
price of bond/sum of present values	1063.28
The value of the bond is $1063.28