Assume the following information for an existing bond that provides annual coupon payments: Par value = $1,000

Question:

Assume the following information for an existing bond that provides annual payments:
Par value = $1,000
Coupon rate = 11%
Maturity = 4 years
Required rate of return by investors = 11%
a. What is the present value of the bond?
b. If the required rate of return by investors were 14 percent instead of 11 percent, what would be the present value of the bond?
c. If the required rate of return by investors were 9 percent, what would be the present value of the bond?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...