Enterprise, Inc. bonds have an annual coupon rate of 9 percent. The interest is paid semiannually and the bonds mature in 13 years. Their par value is $1,000. If the market's required yield to maturity on a comparable-risk bond is 16 percent, what is the value of the bond? What is its value if the interest is paid annually?

Enterprise, Inc. bonds have an annual coupon rate of 9 percent. The interest is paid semiannually and the bonds mature in 13 years. Their par value is $1,000. If the market's required yield to maturity on a comparable-risk bond is 16 percent, what is the value of the bond? What is its value if the interest is paid 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 7P: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate,...

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Question content area bottom

Part 1

a. The value of the Enterprise bonds if the interest is paid semiannually is

$enter your response here.

(Round 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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