Problem: 5-year, P10,000 Debenture bond, 10% p.a. interest payable annually is offered to Joy at 98. At the time the bond is offered to Joy, it has 3 years remaining life. Joy wants a required rate of return of 12% Required: a. What is the value of the bond if the required rate of return of Joy is 12% p.a. Should Joy purchase the bond? b. What is the value of the bond if the required rate of return of Joy is 8% p.a. Should Joy purchase the bond? c. What is the value of the bond if the required rate of return of Joy is 10% p.a. Should Joy purchase the bond? Comment on the results of your computation above.
Problem: 5-year, P10,000 Debenture bond, 10% p.a. interest payable annually is offered to Joy at 98. At the time the bond is offered to Joy, it has 3 years remaining life. Joy wants a required rate of return of 12% Required: a. What is the value of the bond if the required rate of return of Joy is 12% p.a. Should Joy purchase the bond? b. What is the value of the bond if the required rate of return of Joy is 8% p.a. Should Joy purchase the bond? c. What is the value of the bond if the required rate of return of Joy is 10% p.a. Should Joy purchase the bond? Comment on the results of your computation above.
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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Problem: 5-year, P10,000 Debenture bond, 10% p.a. interest payable annually is offered to Joy at 98. At the time the bond is offered to Joy, it has 3 years remaining life. Joy wants a required
Required:
a. What is the
b. What is the value of the bond if the required rate of return of Joy is 8% p.a. Should Joy purchase the bond?
c. What is the value of the bond if the required rate of return of Joy is 10% p.a. Should Joy purchase the bond?
Comment on the results of your computation above.
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