Svanur ehf. issued an extraordinary bond five years ago. This bond was for 8 years. The bond was 10 million. ISK at nominal value and it bears 6% interest. The first 4 years are only interest payments from the bond. After that, annual installments of the letter are paid ie. ISK 2.5 million per year, for four years, plus annual interest payments. Now 5 years have passed. There are three payments left on the bond. What are the bonds worth now if the required yield is 4.0 % ?

Svanur ehf. issued an extraordinary bond five years ago. This bond was for 8 years. The bond was 10 million. ISK at nominal value and it bears 6% interest. The first 4 years are only interest payments from the bond. After that, annual installments of the letter are paid ie. ISK 2.5 million per year, for four years, plus annual interest payments. Now 5 years have passed. There are three payments left on the bond. What are the bonds worth now if the required yield is 4.0 % ?

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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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

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Manshukh

Svanur ehf. issued an extraordinary bond five years ago. This bond was for 8 years. The bond was 10 million. ISK at
nominal value and it bears 6% interest. The first 4 years are only interest payments from the bond. After that, annual
installments of the letter are paid ie. ISK 2.5 million per year, for four years, plus annual interest payments. Now 5 years
have passed. There are three payments left on the bond. What are the bonds worth now if the required yield is 4.0 % ?

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