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Magdalena have provided you with the following information in the table and you are required to...

Magdalena have provided you with the following information in the table and you are required to find the value of the below bond to assist her with her investment decision: Cash Flow Appropriate required return End of year Amount 1 3,000.00 2.1% 2 3,000.00 3 3,000.00 4 53,000.00

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Expert Solution

The value of the bond is equal to the present value of the annual cash flows

Discount rate, r = 2.1% = 0.021

PV = 3,000.00/(1 + 0.021)^1 + 3,000.00/(1 + 0.021)^2 + 3,000.00/(1 + 0.021)^3 + 53,000.00/(1 + 0.021)^4

PV = 2,938.2957884427 + 2,877.86071346 + 2,818.6686713615 + 48,772.2623513408

PV = $57,407.0875246

The value of the bond is $57,407.0875246

jeff jeffy answered 2 years ago
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