Samuel, Inc. bonds have a 3% coupon rate with semiannual coupon payments. They have 10 years...

Samuel, Inc. bonds have a 3% coupon rate with semiannual coupon payments. They have 10 years to maturity and a par value of $1,000. Compute the value of Samuel's bonds if investors' required rate of return is 5%.


$1,178.85
		$726.34
		$845.57
		$945.73

Solutions

Expert Solution

Semiannual interest = $1,000 * 0.03 * 6/12 = $15

Current bond price = $15(PVIFA 2.5%,20) + $1,000(PVIF 2.5%,20)

Current bond price = ($15 * 15.5891622844) + ($1,000 * 0.61027094279)

Current bond price = $845.57

jeff jeffy answered 1 year ago

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