Question

In: Finance

A 10-year GM bond has a 10% coupon rate and was issued 4 years ago. If...

A 10-year GM bond has a 10% coupon rate and was issued 4 years ago. If investors require a return of 12%, calculate the bond’s value. Show the (condensed) time line and key steps of two methods. For the NS method, show the abbreviated equation/expression.

Solutions

Expert Solution

Year CF PVF@12% DCF
5 10 0.892857143 8.928571
6 10 0.892857143 8.928571
7 10 0.892857143 8.928571
8 10 0.892857143 8.928571
9 10 0.892857143 8.928571
10 110 0.892857143 98.21429
Value of Bond 142.8571

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