Question

0/2.5 pts Question 29 Moerdyk Corporation's bonds have a 15-year maturity, a 5.25% coupon rate with interest paid semiannually, and a par value of $1,000. The nominal required rate of return on these bonds is 7.50% What is the bond's intrinsic value? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Answer 1

price of coupon = Coupon payment per period * [1-(1+i)^-n]/i + par value/(1+i)^n

i = interest rate per period

n = number of periods

=>

price = 52.5/2 * [1-(1+7.5%/2)^-30]/(7.5%/2) + 1000/(1+7.5%/2)^30

= 799.42