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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 $1,000 par value. The annual coupon interest rate is 15 percent and the​ market's required yield to maturity on a​comparable-risk bond is 8 percent. The value of the bond is ​$  

​ (Round to the nearest​ cent.

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Answer #1

Par Value = $1,000

Annual Coupon Rate = 15.00%
Annual Coupon = 15.00% * $1,000
Annual Coupon = $150

Annual Required Return = 8.00%
Time to Maturity = 18 years

Value of Bond = $150 * PVIFA(8.00%, 18) + $1,000 * PVIF(8.00%, 18)
Value of Bond = $150 * (1 - (1/1.08)^18) / 0.08 + $1,000 / 1.08^18
Value of Bond = $150 * 9.37189 + $1,000 * 0.25025
Value of Bond = $1,656.03

The value of the bond is $1,656.03

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