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6. Using a required rate of return of 8 percent, determine the value of a $10,000 (face value) bond with annual interest payments and which matures in exactly 10 years. The bond has a coupon rate of 7 percent, and the next interest payment falls exactly 12 months from today. Inputs/variables: Face amount of bond Coupon rate (annual payments) Timing of 1st cash flow (years) Year to maturity Discount rate Solution: T= Expected cash flows Annual present values of projected cash flows: 0l $10,000 7.00% 1 10 8.00% $0.00 $0.00 1 $700.00 $648.15 2 $700.00 $600.14

6. Using a required rate of return of 8 percent, determine the value of a $10,000 (face value) bond with annual interest payments and which matures in exactly 10 years. The bond has a coupon rate of 7 percent, and the next interest payment falls exactly 12 months from today. Inputs/variables: Face amount of bond Coupon rate (annual payments) Timing of 1st cash flow (years) Year to maturity Discount rate Solution: T= Expected cash flows Annual present values of projected cash flows: 0l $10,000 7.00% 1 10 8.00% $0.00 $0.00 1 $700.00 $648.15 2 $700.00 $600.14

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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6. Using a required rate of return of 8 percent, determine the value of a $10,000 (face value) bond with annual interest payments and which matures in exactly 10 years. The bond has a coupon rate of 7 percent, and the next interest payment falls exactly 12 months from today. Inputs/variables: Face amount of bond Coupon rate (anmial payments) Timing of 1st cash flow (years) Year to maturity Discount rate Solution: T= Expected cash flows Annual present values of projected cash flows: 0l $10,000 7.00% 1 10 8.00% $0.00 $0.00 1 $700.00 $648.15 2 $700.00 $600.14
Transcribed Image Text:6. Using a required rate of return of 8 percent, determine the value of a $10,000 (face value) bond with annual interest payments and which matures in exactly 10 years. The bond has a coupon rate of 7 percent, and the next interest payment falls exactly 12 months from today. Inputs/variables: Face amount of bond Coupon rate (anmial payments) Timing of 1st cash flow (years) Year to maturity Discount rate Solution: T= Expected cash flows Annual present values of projected cash flows: 0l $10,000 7.00% 1 10 8.00% $0.00 $0.00 1 $700.00 $648.15 2 $700.00 $600.14
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