Question:

The Garcia Companys bonds have a face value of $1,000, will mature in ten years, and carry a coupon rate of 16 percent. Assuming that the interest payments are made semi-annually, answer the following:

a. Determine the present value of the bonds cash flows if the required rate of return is 16.64 percent.

Answer: The periodic interest rate is the value of r such that = The semiannual coupon = The number of periods = Price =

b. How would your answer change if the required rate of return is 12.36 percent?

Answer: The periodic interest rate is the value of r such that = Price =

Answer each problem in detail with conclusion and results