An issue of bonds with par of $1,000 matures in 8 years and pays 9% p.a. interest

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semi-annually. The market price of the bonds is $955 and your required rate of return
is 8%.

(a) Calculate the bonds expected rate of return.

(b) Calculate the value of the bond to you, given your required rate of return.

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Corporate Finance A Focused Approach

ISBN: 978-1439078082

4th Edition

Authors: Michael C. Ehrhardt, Eugene F. Brigham

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Posted Date: Apr 23, 2024 06:46 AM

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An issue of bonds with par of $1,000 matures in 8 years and pays 9% p.a. interest

Question:

Expert Answer:

a To calculate the bonds expected rate of return we need to compare the bonds coupon payment and its capital gain or loss to the initial investment Th... View the full answer

Corporate Finance A Focused Approach

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