You own a 5-year bond that has a face value of $1000 and pays 10% interest each year. Two years later, the interest rate goes down to 8%. You do not want to wait for 5 years to get your principle of $1, 000 back because you really need the money, so you decide to sell it on the open market. What will the Present Value (new market value) be for the bond? please show the step-by-step process!!!

You own a 5-year bond that has a face value of $1000 and pays 10% interest each year. Two years later, the interest rate goes down to 8%. You do not want to wait for 5 years to get your principle of $1, 000 back because you really need the money, so you decide to sell it on the open market. What will the Present Value (new market value) be for the bond? please show the step-by-step process!!!

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

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