What is the value of a 20 year $1,000 face value bond with a coupon rate...
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What is the value of a 20 year $1,000 face value bond with a coupon rate of 8% (pays $40 semi-annually) if the value of money to you is 12%? Pay SX now Receive $40 semi-annually for 20 years Receive $1,000 at end of 20 years When discounting the $1,000 lump sum payment use semi-annual compounding to agree with the compounding frequency of the uniform series. b) What is the value of the bond if the value of money to you is 8%? c) What is the value of the bond if the value of money to you is 16%? That's the way the bond market works. What is the value of a 20 year $1,000 face value bond with a coupon rate of 8% (pays $40 semi-annually) if the value of money to you is 12%? Pay SX now Receive $40 semi-annually for 20 years Receive $1,000 at end of 20 years When discounting the $1,000 lump sum payment use semi-annual compounding to agree with the compounding frequency of the uniform series. b) What is the value of the bond if the value of money to you is 8%? c) What is the value of the bond if the value of money to you is 16%? That's the way the bond market works.
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Answer rating: 100% (QA)
To calculate the present value of the bond we need to discount the future cash flows using the disco... View the full answer
Related Book For
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman
Posted Date:
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