Question
You are considering purchasing a bond with the following characteristics: par value = $1,000 coupon rate = 6% per year payment schedule = semiannual (June
You are considering purchasing a bond with the following characteristics:
par value = $1,000
coupon rate = 6% per year
payment schedule = semiannual (June 15, December 15)
maturity date = December 15, 2043
required rate of return = 8% per year
current market price = 92.5% of par value
Answer the following concerning this bond.
A. What is the dollar amount of the bond's semiannual coupon payments? B. What is the dollar amount of the bond's current market price?
C. How many coupon payments are there remaining on this bond?
D. Using the Discounted Cash Flow Method, what is the bond's value?
E. Using the Discounted Cash Flow Method, what is the bond's annual expected return (yield-to-maturity)?
F. Based on your answer to part D, should you invest in the bond? Why or why not?
G. Based on your answer to part E, should you invest in the bond? Why or why not?
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International financial management
Authors: Jeff Madura
9th Edition
978-0324593495, 324568207, 324568193, 032459349X, 9780324568202, 9780324568196, 978-0324593471
