A bond has 9 years until maturity with a coupon rate of 7% and an annual coupon payment of $50 and a future value of $1000. Calculate the Present Value. The same bond has a future value of $1,000 (keeping the same prior assumptions (9 years until maturity, 7% coupon rate), however, excluding the annual coupon payment). Calculate the Present Value.

A bond has 9 years until maturity with a coupon rate of 7% and an annual coupon payment of $50 and a future value of $1000. Calculate the Present Value. The same bond has a future value of $1,000 (keeping the same prior assumptions (9 years until maturity, 7% coupon rate), however, excluding the annual coupon payment). Calculate the Present Value.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 4MC

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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.

Question

A bond has 9 years until maturity with a coupon rate of 7% and an
annual coupon payment of $50 and a future value of $1000. Calculate the Present Value.

The same bond has a future value of $1,000 (keeping the same prior
assumptions (9 years until maturity, 7% coupon rate), however,
excluding the annual coupon payment). Calculate the Present Value.

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