A firm issues a $10 million bond with a 6% coupon rate, 4-year maturity, and annual interest
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Question:
A firm issues a $10 million bond with a 6% coupon rate, 4-year maturity, and annual interest payments when market interest rates are 7%.
The initial book value of the bonds is:
A. $9,400,000.
B. $9,661,279.
C. $10,000,000.
The present value of a 4-year annuity of $600,000 plus a 4-year lump sum of $10 million, all valued at a discount rate of 7%, equals $9,661,279.
Show me the detailed process and formula to get $9,661,279.
Related Book For
Introduction to Corporate Finance
ISBN: 978-1119171287
4th edition
Authors: Laurence Booth, Sean Cleary, Ian Rakita
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