Calculate the value of a bond that matures in 12 years and has a $1,000 par...

Question

Question

Calculate the value of a bond that matures in 12 years and has a $1,000 par value. The annual coupon interest rate is 14

percent and the market's required yield to maturity on a comparable-risk bond is 12 percent.

The value of the bond is_____?

business accounting

Answer 1

Answer #1

Annual coupon=1000*14%=140

Hence value of bond=Annual coupon*Present value of annuity factor(12%,12)+$1000*Present value of discounting factor(12%,12)

=140*6.194374225+$1000*0.256675092

=$1123.89(Approx).

NOTE:

1.Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=140[1-(1.12)^-12]/0.12

=140*6.194374225

2.Present value of discounting factor=1000/1.12^12

=1000*0.256675092

Answer 2

Similar Homework Help Questions

Calculate the value of a bond that matures in 14 years and has a $1,000 par...

Calculate the value of a bond that matures in 14 years and has a $1,000 par value. The annual coupon interest rate is 13 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent. Question 7-2
Calculate the value of a bond that matures in 18 years and has a $1,000 par...

Calculate the value of a bond that matures in 18 years and has a $1,000 par value. The annual coupon interest rate is 15 percent and the market's required yield to maturity on acomparable-risk bond is 8 percent. The value of the bond is $ (Round to the nearest cent.
A bond that matures in 15 years has a $1,000 par value. The annual coupon interest...

A bond that matures in 15 years has a $1,000 par value. The annual coupon interest rate is 12 percent and the market's required yield to maturity on a comparable-risk bond is 14 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?

(Bond valuation) A bond that matures in 19 years has a $1,000 par value. The annual...

(Bond valuation) A bond that matures in 19 years has a $1,000 par value. The annual coupon interest rate is 14 percent and the market's required yield to maturity on a comparable-risk bond is 13 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually? a. The value of this bond if it paid interest annually would be $ nothing. (Round to the...
(Bond valuation) Calculate the value of a bond that matures in 17 years and has a...

(Bond valuation) Calculate the value of a bond that matures in 17 years and has a $1,000 par value. The annual coupon interest rate is 13 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent. The value of the bond is $___. (Round to the nearest cent.)
A bond that matures in 13 years has a $1,000 par value. The annual coupon interest...

A bond that matures in 13 years has a $1,000 par value. The annual coupon interest rate is 8 percent and the market's required yield to maturity on a comparable-risk bond is 16 percent. What would be the value of this bond if it paid interest annually? What would be the value of this bond if it paid interest semiannually?

A bond that matures in 12 years has a $1,000 par value. The annual coupon interest rate is 11 percent and the market's...

A bond that matures in 12 years has a $1,000 par value. The annual coupon interest rate is 11 percent and the market's required yield to maturity on a comparable-risk bond is 17 percent. What would be the value of this bond if it paid interest annually_____? What would be the value of this bond if it paid interest semiannually_____? a. The value of this bond if it paid interest annually would be $nothingm. (Round to the nearest cent.)
Question 1: (10 points). (Bond valuation) Calculate the value of a bond that matures in 12...

Question 1: (10 points). (Bond valuation) Calculate the value of a bond that matures in 12 years and has $1,000 par value. The annual coupon interest rate is 9 percent and the market's required yield to maturity on a comparable-risk bond is 12 percent. Round to the nearest cent. The value of the bond is
(Related to Checkpoint 9.3) (Bond valuation) Calculate the value of a bond that matures in 15...

(Related to Checkpoint 9.3) (Bond valuation) Calculate the value of a bond that matures in 15 years and has a $1,000 par value. The annual coupon interest rate is 14 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent. The value of the bond is $ . (Round to the nearest cent.)

A bond that matures in 17 years has a $1 000 par value. The annual coupon...

A bond that matures in 17 years has a $1 000 par value. The annual coupon interest rate is 14 percent and the market's required yield to maturity on a comparable-risk bond is 17 percent. What would be the value of this bond if it paid interest annually? ______ What would be the value of this bond if it paid interest semiannually? _______