Estimating Bond Valuation

Bombay Hospital & Medical Research Centre plans to issue a tax-exempt bond at an annual coupon rate of 6 percent with a maturity of 20 years

The par value of the bond is $1,000

a) If the market rate is6%, what is the value of the bond?

b) If the market rate falls to 3%, what is the value of the bond?

c)If themarket rate rises to 10%, what is the value of the bond?

d)At what market rate

• does the bond sell at a discount?

• does the bond sell at a premium?