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Calculate the value of a bond that will mature in 8 years’ time and has a $1000 face value. The coupon interest rate is 6% and the bond investors’ required rate of return is 10%p.a.

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

Calculate the value of a bond that will mature in 8 years’ time and has a $1000 face value. The coupon interest rate is 6% and the bond investors’ required rate of return is 10%p.a.

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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