Issued 10 year 6% bonds 3 years agon with a put option of 1000 exercisable at the end of year 3. the market interest rate at that time was 5%. there had been 2% increase in interest rate over these 3 years. How much is the bond worth today?

Issued 10 year 6% bonds 3 years agon with a put option of 1000 exercisable at the end of year 3. the market interest rate at that time was 5%. there had been 2% increase in interest rate over these 3 years. How much is the bond worth today?

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 10P

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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.

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johnson Corp. Issued 10 year 6% bonds 3 years agon with a put option of 1000 exercisable at the end of year 3. the market interest rate at that time was 5%. there had been 2% increase in interest rate over these 3 years. How much is the bond worth today?

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