A bond with 5 years to maturity and a coupon rate of 6% has a par or face value of $20,000. Interest is paid annually. If you require a return of 8% on this bond, what is the value of this bond to you? What is the value of this bond to you?

A bond with 5 years to maturity and a coupon rate of 6% has a par or face value of $20,000. Interest is paid annually. If you require a return of 8% on this bond, what is the value of this bond to you? What is the value of this bond to you?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 8P

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Question

What is the value of this bond to you?

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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