A shipping company sold an issue of 16-year $1,000 par bonds to build new ships. The...

A shipping company sold an issue of 16-year $1,000 par bonds to build new ships. The bonds pay 8.25% interest, compounded semiannually. Today's required rate of return is 6.80%. How much should these bonds sell for today? Round to two decimal places.

To answer the question, you must:

(1) Describe and interpret the assumptions related to the problem.

(2) Apply the appropriate mathematical model to solve the problem.

(3) Calculate the correct solution to the problem.

Solutions

Expert Solution

Calculating Price of Bond,

Using TVM Calculation,

PV = [FV = 1,000, PMT = 41,25, N = 32, I = 0.068/2]

PV = $1,140.09

Bond Price = $1,140.09

jeff jeffy answered 2 years ago

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