Lee Song has just purchased bonds for $48 million that have a par value of $50 million, six years remaining to maturity, and a coupon rate of 15 percent. It expects the interest rate on these bonds to be 10 percent two years from now. At what price could Lee Song sell these bonds two years from now? I used the following equation: Pcb=[CouponPayment/(1+i)^1+CouponPayment/(1+i)^2+....+CouponPayment/(1+i)^n}+FaceValue/(1+i)^n The answer I got was $60,888,151.75 Is this correct?
Lee Song has just purchased bonds for $48 million that have a par value of $50 million, six years remaining to maturity, and a coupon rate of 15 percent. It expects the interest rate on these bonds to be 10 percent two years from now. At what price could Lee Song sell these bonds two years from now? I used the following equation: Pcb=[CouponPayment/(1+i)^1+CouponPayment/(1+i)^2+....+CouponPayment/(1+i)^n}+FaceValue/(1+i)^n The answer I got was $60,888,151.75 Is this correct?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Lee Song has just purchased bonds for $48 million that have a par value of $50 million, six years remaining to maturity, and a coupon rate of 15 percent. It expects the interest rate on these bonds to be 10 percent two years from now. At what price could Lee Song sell these bonds two years from now?
I used the following equation:
Pcb=[CouponPayment/(1+i)^1+CouponPayment/(1+i)^2+....+CouponPayment/(1+i)^n}+FaceValue/(1+i)^n
The answer I got was $60,888,151.75
Is this correct?
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