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4. The Sampson Company issued a $1,000 bond 5 years ago with an initial term of...

4. The Sampson Company issued a $1,000 bond 5 years ago with an initial term of 25 years and a coupon rate of 6%. Today’s interest rate is 10%.

a.What is the bond’s current price if interest is paid semiannually as it is on most bonds?

b.What is the price if the bond’s interest is paid annually? Comment on the difference between a and b.

c. What would the price be if interest was paid semiannually and the bond was issued at a face value of $1,500?

Solutions

Expert Solution

a)

b)

c)

jeff jeffy answered 2 years ago
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