Question

Fresh Water, Inc. sold an issue of 27-year $1,000 par value bonds to the public. The...

Fresh Water, Inc. sold an issue of 27-year $1,000 par value bonds to the public. The bonds have a 7.29 percent coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, Inc. bonds is 10.99 percent. What is the current market price of the bonds?

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Answer #1

  

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Value of Bond =

Where r is the discounting rate of a compounding period i.e. 10.99%

And n is the no of Compounding periods 27 years

Coupon 7.29%

=

= 683.49

Other Version

Value of Bond =

Where r is the discounting rate of a compounding period i.e. 9.07%

And n is the no of Compounding periods 13 years

Coupon 8.17%

=

= 932.87

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