Answered: A P^(7),000 bond with interest at 8%…

A P^(7),000 bond with interest at 8% payable semi annually is priced to yield 5%,m=12. Find the bond premium and value of the bond if it is redeemable at par at the end of 12 years and 6 months.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

A P^(7),000 bond with interest at 8% payable
semi annually is priced to yield 5%, m=12. Find
the bond premium and value of the bond if it
is redeemable at par at the end of 12 years
and 6 months.

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