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The market price of an $1070000, ten-year, 12% (pays interest semiannually) bond issue sold to yield...

The market price of an $1070000, ten-year, 12% (pays interest semiannually) bond issue sold to yield an effective rate of 10% is

A) $1203346

B) $1212599

C) $2003424

D) $1201492

Solutions

Expert Solution

Computatio Of Value Of The Bond
a Semi-annual Coupon Amount $              64,200.00
($1070000*12%/2)
b Present Value Annuity Factor for (20 Years,5%) 12.462210
c Present Value Of Annual Interest (a*b) $           8,00,073.90
d Redemption Value $        10,70,000.00
e Present Value Factor Of (20 Years,5%) 0.37689
g Present Value Of Redemption Amount (d*e) $           4,03,271.75
f Bond Value (c+g) $        12,03,346

jeff jeffy answered 2 years ago
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