Question
Peking Duct Tape Company has outstanding a $1,000 face-value bond with a 14 percent coupon rate and 3 years remaining until final maturity. Interest payments
Peking Duct Tape Company has outstanding a $1,000 face-value bond with a 14 percent coupon rate and 3 years remaining until final maturity. Interest payments are made semiannually. a-What value should you place on this bond if your normal annual required rate of return is (i) 12 percent? (ii) 16 percent? (iii) 18 percent? b-Assume that we are faced with a bond similar to the one described above, except that it is a zero-coupon, pure discount bond. What value should you place on this bond if your normal annual required rate of return is (i) 12 percent? (ii) 14 percent? (iii) 16 percent? (Assume semiannual discounting).
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