Question
(Bond valuation) You are examining three bonds with a par value of $1,000 (you receive $1,000 at maturity) and are concerned with what would happen
(Bond valuation) You are examining three bonds with a par value of $1,000 (you receive $1,000 at maturity) and are concerned with what would happen to their market value if interest rates (or the market discount rate) changed. The three bonds are
Bond Aa bond with 5 years left to maturity that has an annual coupon interest rate of 11 percent, but the interest is paid semiannually.
Bond Ba bond with 8 years left to maturity that has an annual coupon interest rate of 11 percent, but the interest is paid semiannually.
Bond Ca bond with 17 years left to maturity that has an annual coupon interest rate of 11 percent, but the interest is paid semiannually.
What would be the value of these bonds if the market discount rate were
a.11 percent per year compounded semiannually?
b. 4 percent per year compounded semiannually?
c.18 percent per year compounded semiannually?
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Contemporary Financial Management
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
10th Edition
978-0324289114, 0324289111
