Suppose the investor's rate is in the 50,000, 7.5% bond with coupons paid semi-annually. The bond is redeemable on July 1, 2006 and is now bought on July 1. 1999. Find the price Of the bond if (a) the bond is redeemable at par; (b) the bond is redeemable at 110%. (c) the discount if possible.

Answer rating: 100% (QA)

SOLUTION To calculate the price of the bond we need to discount the future cash flows coupon payments and principal using the investors required rate of return We can use the following formula to calculate the price of the bond Price of bond C x 1 1 rn r F 1 rn Where C semiannual coupon payment ... View the full answer