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9 Weatherhead Bakery is issuing a bond with 10 year maturity and annual coupon payments of $80. The yield to maturity of this bong (think of it as the "return") is 8%. In 10 years, Weatherhead Bakey will pay $1,000 to the owner of the bond. The cash flows from the bond are presented below. What would be the fair value of this bond if you wanted to buy it today? Year 0 Coupon Face Value 1 + $80 2 + $80 3 + $80 4 + $80 5 + $80 6 + $80 7 + $80 8 + $80 9 + $80 10 H $80 $1,000 $1,080

9 Weatherhead Bakery is issuing a bond with 10 year maturity and annual coupon payments of $80. The yield to maturity of this bong (think of it as the "return") is 8%. In 10 years, Weatherhead Bakey will pay $1,000 to the owner of the bond. The cash flows from the bond are presented below. What would be the fair value of this bond if you wanted to buy it today? Year 0 Coupon Face Value 1 + $80 2 + $80 3 + $80 4 + $80 5 + $80 6 + $80 7 + $80 8 + $80 9 + $80 10 H $80 $1,000 $1,080

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter6: Bonds (debt) - Characteristics And Valuation
Section: Chapter Questions
Problem 17PROB
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9 Weatherhead Bakery is issuing a bond with 10 year maturity and annual coupon payments of $80. The yield to maturity of this bong (think of it as the "return") is 8%. In 10 years, Weatherhead Bakey will pay $1,000 to the owner of the bond. The cash flows from the bond are presented below. What would be the fair value of this bond if you wanted to buy it today? 2 Year Coupon Face Value 0 1 + $80 $80 3 + $80 4 $80 5 $80 6 + $80 + $80 8 + $80 9 $80 10 1 $80 $1,000 $1,080
Transcribed Image Text:9 Weatherhead Bakery is issuing a bond with 10 year maturity and annual coupon payments of $80. The yield to maturity of this bong (think of it as the "return") is 8%. In 10 years, Weatherhead Bakey will pay $1,000 to the owner of the bond. The cash flows from the bond are presented below. What would be the fair value of this bond if you wanted to buy it today? 2 Year Coupon Face Value 0 1 + $80 $80 3 + $80 4 $80 5 $80 6 + $80 + $80 8 + $80 9 $80 10 1 $80 $1,000 $1,080
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