Question

The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $70,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,800 every six months over the subsequent eight years, and finally pays $3,100 every six months over the last six years. Bond N also has a face value of $70,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 10% compounded semiannually, what is the current price of bond M and bond N?

Answer 1