
Chemistry by OpenStax (2015-05-04)
1st Edition
ISBN: 9781938168390
Author: Klaus Theopold, Richard H Langley, Paul Flowers, William R. Robinson, Mark Blaser
Publisher: OpenStax
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Transcribed Image Text:5. Bond valuation
Roen is planning to invest in five-year, 15% annual coupon bonds with a face value of $1,000 each. Complete the table by calculating the value of
each bond and the current yields at the various discount rates.
Bond
Discount Rate
Bond Value
Current Yield
Bond A
6.00%
Bond B
Bond C
15.00%
17.20%
There is a distinct relationship between the coupon rate, the discount rate, and a bond's price relative to its par value. Based on your preceding
calculations, complete the following statements:
A bond is referred to as a par bond when the coupon rate
A bond is referred to as a discount bond when the coupon rate
A bond is referred to as a premium bond when the coupon rate,
the required yield, and the market value
the required yield, and the market value
the required yield, and the market value
the par value.
the par value.
the par value.
If the market price of the bond is equal to the intrinsic value (the computed value), which bond listed is selling at par?
Bond C
Bond A
Bond B
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