Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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On December 31, 2018, when the market interest rate is 16%, McMann Realty issues $300,000 of 14.25%, 10-year bonds payable. The bonds pay interest semiannually. Determine the
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Step 1
Bond valuation is the process of finding the fair value of the bond. It means to find the present value of a stream of cash flows that it generates. The discounting factor determines the present value of the bond. It can be calculated as follows:
Where,
C = Periodic coupon payments
F = Face value of the bond
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