A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $1,000 face value, and is 10 years from maturity. (LG 3-4) a. If the required rate of return on the bond is 6 percent, what is its fair present value? b. If the required rate of return on the bond is 8 percent, what is its fair present value? e. What do your answers to parts (a) and (b) say about the relation between required rates of return and fair values of bonds?

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter6: Bonds (debt) - Characteristics And Valuation
Section: Chapter Questions
Problem 8PROB
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9. A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $1,000 face value, and is 10 years from
maturity. (LG 3-49)
a. If the required rate of return on the bond is 6 percent, what is its fair present value?
b. If the required rate of return on the bond is 8 percent, what is its fair present value?
e. What do your answers to parts (a) and (b) say about the relation between required rates of return and fair values of bonds?
10. Calculate the vield to maturitu on h en
Transcribed Image Text:9. A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $1,000 face value, and is 10 years from maturity. (LG 3-49) a. If the required rate of return on the bond is 6 percent, what is its fair present value? b. If the required rate of return on the bond is 8 percent, what is its fair present value? e. What do your answers to parts (a) and (b) say about the relation between required rates of return and fair values of bonds? 10. Calculate the vield to maturitu on h en
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