Nirmo Power and Light has two P1,000 par value bonds outstanding. Bond X matures in five years
Fantastic news! We've Found the answer you've been seeking!
Question:
Nirmo Power and Light has two P1,000 par value bonds outstanding. Bond X matures in five years and Bond Y matures in 15 years. Both bonds pay P80 interest annually and currently sell at their par value. Thus, the current required rate of return is 8 percent.
- Which bond should show the greater price change in response to an increase in the required rate of return?
- What is the intrinsic value of each bond if the required rate of return is 9 percent?
- Compare the price changes in the two bonds when the required rate of return changes to 9 percent.
Related Book For
Taxation Of Individuals And Business Entities 2015
ISBN: 9780077862367
6th Edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
Posted Date: