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ABC Company just issued a bond with a S1,000 face value and a 4% coupon paid semi-annually. The appropriate discount rate is 5%, and it
ABC Company just issued a bond with a S1,000 face value and a 4% coupon paid semi-annually. The appropriate discount rate is 5%, and it matures in 5 years. 1. Calculate the coupon payment amount in dollars that will be paid every 6 months. 2. Calculate the intrinsic value of the bond. 3. If the bond is selling at $980, should you buy it? Why? 4. Assume all the same facts, except that the prevailing rate of interest in the market has moved from 5% to 6%. Calculate the new intrinsic value of the bond. 5. What is the relationship between interest rates and the value of a bond
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