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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