Miller Mining has $30 million in land value and $15 in mortgage bonds issued on the...

Miller Mining has $30 million in land value and $15 in mortgage bonds issued on the property. These bonds were originally issued at par ($1000), but are now selling today (April, 2010) based on a 7.75%, compounded semi-annually, market rate of return. The bonds have a stated interest rate of 8% and mature on January 1, 2020. The bonds pay interest semi-annually on July 1 and January 1 each year. Suppose that an investor buys a $1,000 face value bond on April 1, 2010. What dollar amount will the investor pay to the seller on April 1?

Expert Solution

Thus, the bond trades at 101.67%. Therefore, price of the bond = 1000* 101.67% = $1016.70

Thus the Investor has to pay the seller $1017 (approx)

jeff jeffy answered 2 years ago

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