Answered: Compute the value of Murphy’s Moving…

Business

Finance

Compute the value of Murphy’s Moving Company bonds if investors' required rate of return is 4.5%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 16P

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Question

Murphy’s Moving Company bonds have a 4.75% coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature 8 years from now. Compute the value of Murphy’s Moving Company bonds if investors' required rate of return is 4.5%.

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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