Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
100%
a. Find the value of the bond if the required return is (1) 9%, (2) 13%, and (3) 6%.
b. Use your finding in part a and the graph here, to discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value.
c. What two possible reasons could cause the required return to differ from the coupon interest rate?
Transcribed Image Text:1,500-
1,400-
1,300
1,200-
1,100
1,000-
900-
800-
700-
600-
500+
7
11
8
9
10
12
13
Required return (%
Bond Value ($)
CO
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