A bond with $40 coupons every 6 months is purchased at a discount to yield a 8%. If the absolute value of the write-up for the first year is $10, what is the purchase price of the bond? O A. $1250 B. $1500 O C. $2500 O D. $750

A bond with $40 coupons every 6 months is purchased at a discount to yield a 8%. If the absolute value of the write-up for the first year is $10, what is the purchase price of the bond? O A. $1250 B. $1500 O C. $2500 O D. $750

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 7P: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate,...

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Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

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A bond with $40 coupons every 6 months is purchased at a discount to yield /h-8%. If the absolute value of the write-up for the first
year is $10, what is the purchase price of the bond?
A. $1250
B. $1500
C. $2500
D. S750

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A $1000 bond with coupons at j2 = 8% is purchased to yield j2 = 7%. The write down in the first period after purchase is $4.01. What is the purchase price of the bond?
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