Question
In: Finance
Bally's Corporate Bond pays a semi-annual coupon at 8% coupon rate. If this bond has 15...
Bally's Corporate Bond pays a semi-annual coupon at 8% coupon rate. If this bond has 15 years until maturity and the market rate of interest (rd) is 6% what is the value of this bond.
Group of answer choices
$ 827.08
$1,000.00
$ 724.70
$1,196.00
$ 587.06
Solutions
Expert Solution
| Computation Of Bond Value | ||
| a | Semi-annual Interest Amount | $ 40.00 |
| ($1000*8%/2) | ||
| b | PV Annuity Factor for (30 Years,3%) | 19.600441 |
| c | Present Value Of Annual Interest (a*b) | $ 784.02 |
| d | Redemption Value | $ 1,000.00 |
| e | PV Factor Of (30 Years,3%) | 0.41199 |
| g | Present Value Of Redemption Amount (d*e) | $ 411.99 |
| f | Price Of The Bond (c+g) | $ 1,196.00 |
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