ABC, Inc. has issued a bond with par value of $1,000, a coupon rate of 9 percent that is paid annually, and that matures in 20 years. If bonds of similar risk are currently earning a 11% rate of return, how much should ABC, Inc. bond sell for today? If the required return were at 6% instead of 11%, what would the current value of ABC, Inc. bond be? Contrast this finding with your findings in part (a) and discuss.
ABC, Inc. has issued a bond with par value of $1,000, a coupon rate of 9 percent that is paid annually, and that matures in 20 years. If bonds of similar risk are currently earning a 11% rate of return, how much should ABC, Inc. bond sell for today? If the required return were at 6% instead of 11%, what would the current value of ABC, Inc. bond be? Contrast this finding with your findings in part (a) and discuss.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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ABC, Inc. has issued a bond with par value of $1,000, a coupon rate of 9 percent that is paid annually, and that matures in 20 years.
- If bonds of similar risk are currently earning a 11% rate of return, how much should ABC, Inc. bond sell for today?
- If the required return were at 6% instead of 11%, what would the current value of ABC, Inc. bond be? Contrast this finding with your findings in part (a) and discuss.
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