Question
1. Calculate the price of a bond that matures in 8 years, has a face value of $5.000, a coupon rate of 2% (paid
1. Calculate the price of a bond that matures in 8 years, has a face value of $5.000, a coupon rate of 2% (paid semiannually) if the market interest rate is 1%. What is the price of the bond if the market interest rate drops to 0.5%? Consider the two bonds described below: Bond A Bond B Maturity 15 yrs 20 yrs Coupon Rate 10% 6% (Paid semiannually) Par Value $1,000 $1,000 I a. If both bonds had a required return of 8%, what would the bonds' prices be? b. Are these two bonds selling at a discount, premium, or par? c. If the required return on the two bonds rose to 10%, what would the bonds' prices be?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
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