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McDonald's Corporation has 8 7/8% bonds that mature in 15 years. What is the value of...

McDonald's Corporation has 8 7/8% bonds that mature in 15 years. What is the value of a $1000 par value McDonald's Corporation bond for each of the following required rates of return assuming the investor will hold the bond to maturity assume the coupon is paid annually?
a. 10.00%
b. 8.875%
c. 6.00%

Solutions

Expert Solution

M = $1000, n = 15, C = 8.875% * $1000 = $88.75

a) i = 10%

P = $675.04 + $239.39

P = $914.43

b) i = 8.875%

P = $720.70 + $279.30

P = $1,000.00

c) i = 6%

P = $861.96 + $417.27

P = $1,279.23

jeff jeffy answered 2 years ago
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