A eight-year bond, with par value equals $1,000, pays 10% annually. If similar b
ID: 2778387 • Letter: A
Question
A eight-year bond, with par value equals $1,000, pays 10% annually. If similar bonds are currently yielding 9% annually, what is the market value of the bond? Use semi-annual analysis. Use Appendix B and Appendix D. (Round "PV Factors" to 3 decimal places, intermediate calculations and final answer to 2 decimal places.)
rev: 07-23-2011
$1,055.70
$1,205.70
$1,005.70
$1,355.70
A eight-year bond, with par value equals $1,000, pays 10% annually. If similar bonds are currently yielding 9% annually, what is the market value of the bond? Use semi-annual analysis. Use Appendix B and Appendix D. (Round "PV Factors" to 3 decimal places, intermediate calculations and final answer to 2 decimal places.)
Explanation / Answer
Market Value of Bond = C*[1-(1/1+i)n]/I +M/(1+i)n
=50*[1-1/1.045)16]/.045 + 1000/(1.045)16
=50*(1-.494)/.045) +1000/2.02
=50*11.222 + 494.559
= 561.111+494.559
= 1055.7
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