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what is the value of the bond with a discount rate of 5%? 1,234 1,108 1,154 1,299

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Instructions: Choose the right answer w/ explanation.

[2]. JFINEX Corporation issued a 10-year bond four years ago that has a face value of 1,000 and a coupon rate of 8%. If the coupons are compounded semi-annually, what is the value of the bond with a discount rate of 5%?

1,234

1,108

1,154

1,299

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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