A4) 6. A bond has a face value of $1,000, a coupon rate of 7%, and maturity in twoyears (the first coupon payment is one year from now). The bond's yield tomaturity is 11%. What is the bond's price?

The price of bond is calculated with the help of following formula Price of Bond = Present Value of…

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years (the first coupon payment is one year from now). The bond's yield to maturity is 11%. What is the bond's price?

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 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

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A4)

6. A bond has a face value of $1,000, a coupon rate of 7%, and maturity in two
years (the first coupon payment is one year from now). The bond's yield to
maturity is 11%. What is the bond's price?

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