Pierre bought a 9% four-year bond with a par value of $100. The bond pays the coupon payments semi-annual. The current discount rate is 10%. Please calculate the PV of the principal amount. A) $67.68 B) $58.77 D $100.00 $78.89

Pierre bought a 9% four-year bond with a par value of $100. The bond pays the coupon payments semi-annual. The current discount rate is 10%. Please calculate the PV of the principal amount. A) $67.68 B) $58.77 D $100.00 $78.89

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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

Pierre bought a 9% four-year bond with a par value of $100. The bond pays the coupon payments semi-annual. The current
discount rate is 10%. Please calculate the PV of the principal amount.
A) $67.68
B) $58.77
с $100.00
$78.89

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