Answered: A bond with par value $1,000 has a…

A bond with par value $1,000 has a current yield of 7% and a coupon rate of 8%. What is the bond's price if it pays interest annually?

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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Question

A bond with par value $1,000 has a current yield of 7% and a coupon rate of 8%. What is the bond's price if it pays interest annually?(Round your answer to the nearest cent.)

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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