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A corporate bond has a life of 10 years, and issues coupon payments of $80 per year for the first 4 years, and $100 for the next 6 years. The principal payment at the end of the 10-year period is $900. What is that bond worth at the time of issuance? Assume the ongoing interest rate is 5% per year.

A corporate bond has a life of 10 years, and issues coupon payments of $80 per year for the first 4 years, and $100 for the next 6 years. The principal payment at the end of the 10-year period is $900. What is that bond worth at the time of issuance? Assume the ongoing interest rate is 5% per year.

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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5. A corporate bond has a life of 10 years, and issues coupon payments of $80 per year for the first 4 years, and $100 for the next 6 years. The principal payment at the end of the 10-year period is $900. What is that bond worth at the time of issuance? Assume the ongoing interest rate is 5% per year.
Transcribed Image Text:5. A corporate bond has a life of 10 years, and issues coupon payments of $80 per year for the first 4 years, and $100 for the next 6 years. The principal payment at the end of the 10-year period is $900. What is that bond worth at the time of issuance? Assume the ongoing interest rate is 5% per year.
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