Question
The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $10,000 and matures in 20 years. The bond makes
The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $10,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $1,200 every six months over the subsequent eight years, and finally pays $2,500 every six months over the last six years. Bond N also has a face value of $10,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 6 percent compounded semi-annually, what is the current price of bond M and bond N?..
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