Answered: A S80000 bond bearing interest at 7%…

A S80000 bond bearing interest at 7% payable semi dash annually is bought six years before maturity to yield 7.1% compounded quarterly. If the bond is redeemable at par, what is the purchase price?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

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A S80000 bond bearing interest at 7% payable semi dash annually is bought six years before maturity to yield 7.1% compounded quarterly. If the bond is redeemable at par, what is the purchase price?

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