Question
a) Johnson Motors’ bonds have 10 years remaining to maturity. Coupon interest is paid annually, the...
a) Johnson Motors’ bonds have 10 years remaining to maturity. Coupon interest is paid annually, the bonds have a $1,000 par value, and the coupon rate is 7 percent. The bonds have a yield to maturity of 8 percent. What is the current market price of these bonds?
b) BSW Corporation has a bond issue outstanding with an annual coupon rate of 7 percent paid semiannually and four years remaining until maturity. The par value of the bond is $1,000. Determine the fair present value of the bond if market conditions justify a 14 percent annual required rate of return, compounded semiannually.
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