Question
I can't figure this out: The McKeegan Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in
I can't figure this out:
The McKeegan Corporation has two different bonds currently outstanding. Bond M has a face value of $20,000 and matures in 20 years. The bond makes no payments for the fi rst six years, then pays $1,100 every six months over the subsequent eight years, and fi nally pays $1,400 every six months over the last six years. Bond N also has a face value of $20,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. If the required return on both these bonds is 7 percent compounded semiannually, what is the current price of bond M? Of bond N?
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