( Bond Valuation) You own a 20-year, $1,000 par value bond paying 6 percent interest annually....
( Bond Valuation) You own a 20-year, $1,000 par value bond paying 6 percent interest annually. The market price of the bond is $750, and your required rate of return is 10 percent.
1) What is the value of the bond to you, given your 10 percent required rate of return?
Homework Answers
Value of bond is $ 659.46
| Price of bond is the present value of future cash flows. | |||||||
| Present value of future cash flows | = | =-pv(rate,nper,pmt,fv) | Where, | ||||
| = | $ 659.46 | rate | = | 10% | |||
| nper | = | 20 | |||||
| pmt | = | $ 60.00 | |||||
| fv | = | $ 1,000.00 | |||||
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