The KLM bond has a 8% coupon rate (with interest paid semi-annually), a maturity value of P1,000, and matures in 5 years. If the bond is priced to yield 6%, what is the bond's current price? **coupon rate (semi-annual payment)

The KLM bond has a 8% coupon rate (with interest paid semi-annually), a maturity value of P1,000, and matures in 5 years. If the bond is priced to yield 6%, what is the bond's current price? **coupon rate (semi-annual payment)

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 14P: Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has...

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Question

The KLM bond has a 8% coupon rate (with interest paid semi-annually), a maturity value of P1,000, and matures in 5 years. If the bond is priced to yield 6%, what is the bond's current price?

**coupon rate (semi-annual payment)

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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