A $1,000 principal value bond costs $35 in quarterly interest and matures in ten years. How much should you be able to pay for this bond if your nominal annual necessary rate of return is 12% with quarterly compounding?a. $ 941.36b. $1,051.25c. $1,115.57d. $1,391.00e. $ 825.49

A $1,000 principal value bond costs $35 in quarterly interest and matures in ten years. How much should you be able to pay for this bond if your nominal annual necessary rate of return is 12% with quarterly compounding?a. $ 941.36b. $1,051.25c. $1,115.57d. $1,391.00e. $ 825.49

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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Question

71. A $1,000 principal value bond costs $35 in quarterly interest and matures in ten years. How much should you be able to pay for this bond if your nominal annual necessary rate of return is 12% with quarterly compounding?a. $ 941.36b. $1,051.25c. $1,115.57d. $1,391.00e. $ 825.49

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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