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i tried solving this question, is the part b right? we need to find the bond value when t= 5 years right? and the bond
i tried solving this question, is the part b right? we need to find the bond value when t= 5 years right? and the bond is at par?
5. A $1000 bond pays an annual coupon of $40. The market rate of return is 4%. The bond is four years from maturity. a) What should the bond sell for? b) What if the bond is five years from maturity? 5 $1000 FV $40 Annual coupon MR= 4.1: Time 4 years a) BV = Coupon X PVIFAFV x PVAFISA Payment rastom BV = 40% + 1000 x 1 -0.04 0.04(1+0:04)". 40 x [ + ] Women BV: 145.195 +854.804 = 999.9992000 .. Bon d will sell for = $1000 Cat par) b) t=5 BV: 40 -1 0.04(1+0.04)5 Brasheed Bond value = $1000 Loo +1000xi [C1+0:04) 5 = 178.071 821.927 $100 Step by Step Solution
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