Firm ABC has a bond with face value of $100, coupon rate of 7%, and a...
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Firm ABC has a bond with face value of $100, coupon rate of 7%, and a 15-years maturity. Firm ABC makes semi-annual coupon payments. Investors require a return of 4%. (1) What is the present value of all coupon payments? (2) What is the present value of face value? (3) What is the value of the bond? (4) If the price of the bond is $125, will you invest in such a bond? (5) If interest rate goes up by 2%, what will be the value of the bond? (6) What will be the rate of change in the value of the bond compared to the value of (3) above? Firm ABC has a bond with face value of $100, coupon rate of 7%, and a 15-years maturity. Firm ABC makes semi-annual coupon payments. Investors require a return of 4%. (1) What is the present value of all coupon payments? (2) What is the present value of face value? (3) What is the value of the bond? (4) If the price of the bond is $125, will you invest in such a bond? (5) If interest rate goes up by 2%, what will be the value of the bond? (6) What will be the rate of change in the value of the bond compared to the value of (3) above?
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To solve these problems we need to calculate the present value of the bonds cash flows using the given information Present value of all coupon payment... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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