# Question

The Garcia Company’s bonds have a face value of $1,000, will mature in 10 years, and carry a coupon rate of 16 percent. Assume interest payments are made semiannually.

a. Determine the present value of the bond’s cash flows if the required rate of return is 16 percent.

b. How would your answer change if the required rate of return is 12 percent?

a. Determine the present value of the bond’s cash flows if the required rate of return is 16 percent.

b. How would your answer change if the required rate of return is 12 percent?

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