A $1,000, 12 year bond carries a 3.5% coupon. If the prevailing market rate on the date of purchase is 4.5% compounded semiannually, what is the purchase price of the bond? Multiple Choice $1,254 70 $947.93 $1097.30

A $1,000, 12 year bond carries a 3.5% coupon. If the prevailing market rate on the date of purchase is 4.5% compounded semiannually, what is the purchase price of the bond? Multiple Choice $1,254 70 $947.93 $1097.30

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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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:

Question

A $1,000, 12 year bond carries a 3.5% coupon. If the prevailing market rate on the date of purchase is 4.5% compounded semiannually, what is the
purchase price of the bond?
Multiple Choice
$1,25470
$047.93
S1097.30
$908.05
$2.180 44

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