A 5-year bond has a face value of £100. The bond pays coupons semi-annually at a rate of 2%. The bond currently yields 5% p.a. effective in the market. Calculate the price of the bond Enter your answer as a decimal correct to 2 decimal places

A 5-year bond has a face value of £100. The bond pays coupons semi-annually at a rate of 2%. The bond currently yields 5% p.a. effective in the market. Calculate the price of the bond Enter your answer as a decimal correct to 2 decimal places

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

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A 5-year bond has a face value of £100. The bond pays coupons semi-annually at a rate of 2%.

The bond currently yields 5% p.a. effective in the market.

Calculate the price of the bond

Enter your answer as a decimal correct to 2 decimal places

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