Question
The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $60,000 and matures in 20 years. The bond makes
The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $60,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,700 every six months over the subsequent eight years, and finally pays $3,000 every six months over the last six years. Bond N also has a face value of $60,000 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 12% compounded semiannually, what is the current price of bond M and bond N?
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